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 certain costs can be paid with "educational assistance payments" as defined in subsection 146.1(1).
Position:
Department has not developed guidelines because there are limits on how much can accrue to provide "educational assistance payments" - if trustee of RESP pays in accordance with the plan as registered, this is acceptable.
Reasons:
The term "educational assistance payments" is broad and the Department has never attempted to define what it means. Savings which can accrue under an RESP are limited and thus we have concluded that if the plan meets the registration requirements and is registered and the trustee administers the plan in accordance with its terms, payments under the terms of the plan will generally meet the conditions under the Act.
962942
XXXXXXXXXX P. Spice
Attention: XXXXXXXXXX
April 10, 1997
Re: "Educational Assistance Payments"
Subsection 146.1(1) of the Income Tax Act (the "Act")
This is in reply to your facsimile transmission of September 4, 1996, in which you ask us to confirm the types of expenses which can be covered by "educational assistance payments" as defined in the above-noted provision. We apologize for the delay in replying.
LAW
The relevant provisions are as follows:
Subsection 146.1(1) of the Act - "educational assistance payment" means any amount other than a refund of payments, paid or payable under an education savings plan to or for a beneficiary to assist the beneficiary to further the beneficiary's education at the post-secondary school level.
Subsection 146.1(2) of the Act - The Minister shall not accept for registration for the purposes of this Act any education savings plan of a promoter unless, in the Minister's opinion, it complies with the following conditions:
(a) the plan provides that the property of the trust governed by the plan...is irrevocably held for any of the purposes described in the definition "trust" in subsection (1)...
(g) the plan does not allow for the payment of educational assistance payments to an individual unless the individual is, at the time the payment is made, a student in full-time attendance at a post-secondary educational institution and enrolled in a qualifying educational program at the institution....
Subsection 146.1(1) of the Act - "trust"...means any person who irrevocably holds property pursuant to an education savings plan for (a) the payment of educational assistance payments....(Paragraphs 146.1(1)(b) through (e) of the definition are not relevant to the issue).
Position
The Department has not developed any guidelines respecting the meaning of "educational assistance payment". The term is broad in scope and it is our general position that if payments are made in accordance with the plan as registered, the RESP trustee will comply with the Act's requirements. Our position is explained as follows.
The rules limiting the annual contributions to an RESP in respect of a beneficiary to $1500 times a maximum of 21 years were enacted to ensure that the amount of tax-assisted savings available to one beneficiary bears a reasonable relationship to the costs of post-secondary education (see 1990 Budget Supplementary Information on amendments to RESP rules). (Note that the amendments proposed by the 1996 and 1997 Federal Budget to change the annual contributions limits to, respectively, $2000 and $4000, and the lifetime limit to $42,000 are justified on the ground that tuition costs have risen since the original law was enacted and also to provide greater flexibility where RESPs are established for the older child.)
Furthermore, payments cannot be made unless the beneficiary is a full-time student at a post-secondary educational institution (see 146.1(2)(g) under LAW above).
Thus, it is our view that the total pool of "educational assistance payments" available for one beneficiary should generally result in any payment meeting the requirements of the Act if such payment is made in accordance with the plan as registered.
We trust the foregoing comments assist.
Yours truly,
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 1997
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 1997
Email this Content