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: We have been asked about our position on the meaning of “post-judgment” interest in relation to a personal damages settlement by a person who lives in Australia. On the basis of the information in the letter, there are no Canadian tax consequences.
Position: Some general comments were provided.
Reasons: See principal issues
October 15, 1998
Re: Post-judgment Interest on Damages in respect of Personal Injury or Death
This is in reply to your letter of July 16, 1998, concerning the above subject.
You have indicated that your wife, a non-resident of Canada, was awarded an amount in 1984 by an Australian court as a result of a personal injury that she sustained. However, the matter was not finally resolved until 1992 when the Australian High Court rendered its decision. Subsequent to that court decision, it was determined that your wife was taxable on post-judgment interest. While it is our understanding that your circumstances have no Canadian income tax implications, you have asked about the Canadian tax treatment of post-judgement interest and the definition of this term, particularly as it relates to the fact situation described above.
Where an amount in respect of damages for personal injury includes or is augmented by pre-judgment interest, it is our general position that such interest is not income to the recipient. On the other hand, post-judgment interest is generally taxable and must be included in income.
The term “post-judgment interest” is not defined in the Income Tax Act and, therefore, its ordinary common law meaning would apply. We have not been provided with the necessary information to make a determination of the date post-judgment interest would be considered to arise, nor would it be appropriate for us to do so in light of the fact the issue is under dispute between you and the Australian tax authorities. Our Department does not have any set guidelines with respect to the issue you have raised.
We trust that these comments will be of assistance to you.
Business and Publications Division
Income Tax Rulings and
Policy and Legislation Branch
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