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: Taxation of Saskatchewan Training Allowances to Disabled Individuals.
Position: Question of fact.
Reasons: If the payments appear to be more in the nature of social assistance and are intended to replace current social assistance payments, then they should be taxable as social assistance under paragraph 56(1)(u). If the primary purpose is to further education then they should be taxable under 56(1)(n) of the Act.
November 4, 1998
Canada Pension/Employment Insurance HEADQUARTERS
Rulings and Coverage Section Karen Power, CA
Regina Tax Service Office (613) 957-8953
Attention: Wayne Flaman
7-982525
Province of Saskatchewan - Training Allowances
We are writing in reply to your letter of September 28, 1998 concerning the taxation of training allowances provided to physically and mentally challenged individuals by the Province of Saskatchewan.
It is our understanding that XXXXXXXXXX a non-profit organization, received funding from the Province of Saskatchewan, Post Secondary Education Department to provide training to physically and mentally challenged individuals.
XXXXXXXXXX
All payments to individuals, throughout both parts of the training, will be made by the XXXXXXXXXX.
Individuals who accept the program will voluntarily remove themselves from social assistance. However, the training allowances received under the program, should equate to about the same as previous amounts received as social assistance.
The issue at hand is whether the training allowances are paid as bursaries pursuant to paragraph 56(1)(n) of the Income Tax Act (the “Act”) or as social assistance pursuant to paragraph 56(1)(u) of the Act.
Since the terms "social assistance" and "bursary" are not defined in the Act, one must look to the meaning of these terms as they are ordinarily defined and understood, in order to determine whether paragraph 56(1)(n) or (u) of the Act applies in a particular situation. "Social assistance" or "social security" is defined in the Oxford English Dictionary (2nd Ed.) as a system whereby the state provides financial assistance for those citizens whose income is inadequate or non-existent owing to disability, unemployment, old age, etc.. A "bursary", on the other hand, is defined in Webster's Third New International Dictionary as "a sum of varying amount given or granted to a needy student". From these definitions it can be seen that a particular payment may have the quality of both social assistance and a bursary if it is paid to a student in financial need as part of the government's social safety net.
In our view the definition of "bursary" is broad enough to encompass almost any form of financial assistance paid to a student to enable the student to pursue his or her education. A social assistance payment, however, is made on a means, needs or income test, and is not dependent on the recipient engaging in any particular type of activity such as schooling. This is not to say that social assistance payments paid to an individual who is in financial need because he or she is a student will necessarily be taxed as a bursary.
If the primary purpose of the training allowance is to provide financial assistance to students in need in order to further their education, and amounts are not paid in conjunction with regular social assistance, then the amounts paid will be considered bursaries and will be included in income pursuant to paragraph 56(1)(n) of the Act. If, on the other hand, training allowances are paid as a supplement or replacement of former social assistance payments, these payments are first and foremost in the nature of social assistance and included in income under paragraph 56(1)(u) of the Act and deducted in computing taxable income in accordance with subparagraph 110(1)(f)(iii) of the Act.
Whether the training allowances you have described are taxable under paragraph 56(1)(n) or paragraph 56(1)(u) of the Act is a question of fact, which must be determined on the basis of all of the details in a particular situation. We have not been provided with sufficient information to establish whether the payments are intended to be a supplement or replacement of social assistance. A review of all relevant documentation, including regulations, program brochures and any agreements between the government of Saskatchewan and the XXXXXXXXXX, should be performed prior to making such a determination.
Roberta Albert, CA
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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