18 November 1997 Internal T.I. 9719097 - ALBERTA HEALTH CARE PLAN - TAXATION OF CONTRIBUTIONS

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.

RULINGS DIRECTORATE
CORRESPONDENCE SUMMARY

Principal Issues:

A retired member of XXXXXXXXXX, a resident of Alberta, is obligated to pay health care premiums to the provincial government of Alberta (medicare). The XXXXXXXXXX fund rebates a percentage of the premiums paid to the retired member less any taxes withheld on account of income taxes. The issue is whether the rebate received is taxable.

Position TAKEN:

Rebate taxable pursuant to either subsection 6(3) or 56(1)(a) depending upon facts.

Reasons FOR POSITION TAKEN:

Income Tax Act and IT-247. Where an employer pays premiums for provincial health care plans that are the liability of the employee such payments are taxable. The payments are taxable to the individual to the extent that such amounts are paid by a former employer, whether pursuant to an employment agreement or from a superannuation fund, and regardless of whether they are paid directly to the province, are rebated to the individual or are paid in any other manner.

			November 18, 1997

	CALGARY TAX SERVICES OFFICE	HEADQUARTERS
	Client Services Directorate	G. Donell
(613) 957-8953
	Attention:  Colleen Kakakaway
			971909

Taxation Rebate received on Alberta Health Plan

This is in reply to your round trip memorandum to us dated July 4, 1997 in which you have asked for our assistance in responding to XXXXXXXXXX in regard to the taxation of annual rebates he receives from his former employer's superannuation fund with respect to health care premiums he is required to pay to the Alberta Health Plan ("AHP"). A copy of our letter to him is attached for your information.

It is our understanding that, in 1994, Alberta eliminated an exemption from the payment of premiums for health care benefits which was previously granted to citizens 65 years of age and older. As a result, individual residents of Alberta, are now, required to pay the AHP premiums. The terms of some employment contracts or superannuation plans (such as that of XXXXXXXXXX) however provide individuals with the benefit of paying part or all of these health care premiums. Such benefit payments are generally made by way of rebate because, in the administration of the AHP, Alberta does not accept health care premium payments directly from former employers or superannuation funds. Rather the premiums must be paid directly by the individual.

We recently (November 13th) spoke at length with XXXXXXXXXX. It appears that his concern stems from a misunderstanding. He believes that amounts paid by the superannuation fund directly to the AHP are not taxable because they are not received by him whereas amounts rebated to him are taxable because they are received. One of our officers, Mr.Gary Donell, advised him that health care premiums that are the liability of an individual and that are paid by a former employer, whether pursuant to an employment agreement or from a superannuation fund, are taxable to that individual regardless of whether they are paid directly to the province, are rebated to the individual or are paid in any other manner. Unfortunately XXXXXXXXXX was not receptive and instead remains convinced that he is being treated unfairly simply because the province of Alberta refuses to allow former employers to make direct payments to the AHP which, he believes, would then not be taxable.

for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch