1 June 1989 Income Tax Severed Letter AC73876 - Injury on Duty Pay

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.

Scarborough District Office             Head Office
John H. Rose                            Small Business and
Chief of Enquiries & Office             General Division
   Examination                          A. Humenuk
                                        613 957-2135

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We are responding to your memorandum dated April 28, 1989, in which you ask us to respond to the above noted taxpayer's query concerning disability payments payable by his former employer. As the issue requires a finding of fact we are responding to you.

In the previously reported court cases between the taxpayer and the Department (67 DTC 675 and 77 DTC 29), it was established that the taxpayer was seriously injured while serving on duty with the Toronto Fire Department. As a result, the taxpayer was paid a disability pension from the Toronto Fire Department Superannuation and Benefit Fund (the Fund). In 1974, the Tax Review Board held that payments from this Fund were substantially the same as those made under a provincial workman's compensation law. Consequently, the court held that the amount received from the Fund by the taxpayer in 1972 was not taxable by virtue of paragraph 81(1)(h) of the Income Tax Act (the Act).

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At this time we offer the following comments concerning paragraph(1)(h) of the Act and injury on duty pay. Paragraph 81(1)(h) of the Act was repealed on March 30, 1983, by Bill C-139. Effective for 1982, an amount received under an employees' or workmans' compensation law of Canada or a province is included in income under paragraph 56(1)(v) of the Act, provided that the amount is not received by the employer. It should be noted that the Department will also permit a deduction under subparagraph 110(1)(f)(ii) of the Act for amounts received as compensation for any injury on duty to the extent that the amount would have been payable under a workers' compensation award as explained in paragraph 4 of Interpretation Bulletin IT 202R "Employees' or Workers' Compensation".

The Workers' Compensation Board of Ontario has advised us that there is a provision under the Ontario Act for both a lump sum payment and a monthly payment to the spouse of an injured worker in the event of death provided that the cause of death relates to the injury or to a complication resulting from the treatment thereof.

The amount of the payment is dependent on the spouse's age at the time of the worker's death, the net earnings of the worker at the time of the injury, and whether or not there are any other dependants in addition to the spouse. If the cause of death relates to the injury or treatment thereof, the lump sum amount payable to a spouse over the age of 60 without dependants will be a fixed sum determined in relation to the Consumer Price Index and the monthly amount will be 60% of the net earnings of the worker at the time of the injury.

Accordingly, it is our view that, notwithstanding the fact that a particular payment is made by the employer and/or received by the spouse, the amount would be included in the recipient's income under paragraph 56(1)(v) and deducted under paragraph 110(1)(f) of the Act to the extent that the amount would have been payable under the Workman's Compensation Act of Ontario or its successor, the Workers' Compensation Act of Ontario.

If the payment in question does not qualify for this treatment, consideration should be given to whether the payment is a death benefit as defined in subsection 248(1) of the Act, a pension benefit or a payment from a group term life insurance policy. Refer to Interpretation Bulletin IT 301 "Death Benefits - Qualifying Payments" for further details.

If, upon obtaining the relevant documentation, you have further questions as to the nature of the payment and the appropriate tax treatment of the receipt thereof, please contact the rulings officer noted above.

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for Director Small Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch