22 April 1996 External T.I. 9605585 - SOCIAL ASSISTANCE PAYMENTS

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

Whether an information slip (T5007 Supplementary) is required to be issued under Regulation 233 for housing subsidies paid in respect of low income or disabled individuals.

Position:

Yes (on the assumption that the subsidies are described in subsection 233(1))

Reasons:

Based on a review of section 233 of the Income Tax Regulations

Canadian Human Rights Commission
242-240 Graham Avenue
Winnipeg, Manitoba	960558
R3C 0J7		M. Eisner

Attention: Mr. Kenneth E. Bass

April 22, 1996

Dear Sirs:

Re: Tax Treatment of Housing Subsidies

This is in reply to your letter of February 1, 1996 concerning the above noted subject. We also acknowledge our telephone conversation on February 27, 1996 (Eisner/Bass).

In your letter, you indicated that a representative of an organization which provides a housing and counselling program to the long-term mentally ill, has recently contacted your office. The representative indicated that the cost of housing and counselling for such individuals ($800 - $3,000 per month) is paid by a provincial government department. According to the representative, the amounts paid in respect of these individuals are taken into account in calculating the goods and services tax credit (the GST credit) whenever an information slip is issued. In relation to this result, you have indicated a concern with subsidies that may be provided to low income or disabled individuals.

You have asked for our comments on the relevant provisions of the Income Tax Act (the Act) in respect of the above information.

Our Comments

The provisions concerning the GST credit are set out in section 122.5 of the Act. This credit is comprised of a basic credit ($199 for 1995), as well as additional credits for a spouse, or a child under 19. As indicated in the enclosed excerpt from the "1995 General Income Tax Guide," which explains the credit in more detail, net income is a factor in determining the GST credit.

Generally, social assistance payments made to an individual on a means, needs, or income test must be included in the individual's income under paragraph 56(1)(u) of the Act. However, if the recipient is married and lives with his or her spouse, these payments are required to be included in the income of the spouse with the higher income. When social assistance payments are required to be included in an individual's income under paragraph 56(1)(u) of the Act, a corresponding deduction is permitted under paragraph 110(1)(f) of the Act in determining taxable income. The effect is that the social assistance payments are not subject to tax. However, as the payments are included in the individual's net income, they are taken into account in determining the amount of certain federal tax credits, including the GST credit.

Subsection 233(1) of the Regulations provides that an information slip (T5007 Supplementary) is generally required to be issued for social assistance payments that are required to be included in income under paragraph 56(1)(u) of the Act. Further, subsection 233(2) of the Regulations specifies the types of social assistance payments that are not required to be reported on information slips. In this regard, we refer you to page 5 of the enclosed "Income Tax Guide for the T5007 Information Return of Benefits" which lists the specific payments that need not be reported on a T5007 Supplementary. You will note that subsidies paid in respect of housing or shelter are not included in that list.

We trust that our comments will be of assistance to you.

Yours truly,

John F. Oulton
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch