Drake v. Human Resources, 2005 TCC 498

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Appeal heard on July 21, 2005, at Saint John, New Brunswick, by

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JUDGMENT

          WHEREAS the Appellant has appealed to a Review Tribunal from a decision made by the Respondent pursuant to the Old Age Security Act, R.S. 1985, c. O-9 (the Act);

          AND WHEREAS the Appellant has raised as a ground of appeal the amount of her income for the calendar year 2002, and that ground of appeal has been referred to the Tax Court of Canada for a decision pursuant to subsection 28(2) of the Act;

          AND having heard the evidence of the Appellant and the submissions of the Appellant and of counsel for the Respondent;

          IT IS THE JUDGMENT OF THIS COURT that the Respondent did not err in his decision as to the amount of the income of the Appellant for the calendar year 2002, and the appeal is dismissed, and the Commissioner of Review Tribunals shall be so advised.

Signed at Ottawa, Canada, this 8th day of August, 2005.

         Bowie J.

REASONS FOR JUDGMENT

BowieJ.

[1]      This appeal concerns the computation of the benefits to which the Appellant was entitled under the Old Age Security Act[1] (the Act) for the period beginning in July 2004 and ending in June 2005. That computation depends upon the amount of her income for 2003.[2] The Appellant disputes the computation of the Minister of Human Resources Development (the Minister), and she has appealed from his decision to a Review Tribunal. Subsection 28(2) of the Act provides that where a ground of such an appeal is that the Minister has wrongly determined the Appellant's income, the appeal must be referred to this Court for decision as to that ground. It was as a result of such a reference that this matter came before me at Saint John, New Brunswick.

[2]      The Appellant was a recipient of benefits under the Act, including the guaranteed income supplement, at the relevant time. It is not disputed that the level of her benefits for the period in question is dependent on her income for 2003. Nor is it disputed that in 2003 she made a withdrawal from a registered retirement plan, because she required a substantial sum with which to purchase a reliable vehicle to carry out certain family responsibilities. The Minister has based her benefits for the period in question on a computation of her income for 2003 that includes the amount of this withdrawal; if he had not included it, her benefits would have been substantially greater. The Appellant says that it is unfair to her to include this amount. Not only is the receipt of the funds withdrawn a non-recurring event, but she received it in the year prior to the benefit year that is the subject of this appeal. By the time of the benefit year (2004-05) she no longer had the money that she had withdrawn. Also, she had to pay tax on the amount withdrawn, and so had only the net amount after tax for her needs.

[3]      I regret to say that the appeal cannot succeed. Section 2 of the Act defines a person's income for a calendar year to be their income as determined in accordance with the Income Tax Act, subject to certain exceptions that have no application here. Subsection 146(8) and paragraph 56(1)(h) of that Act provide (again subject to certain exceptions that do not apply here) that benefits paid out of a registered retirement savings plan to a taxpayer during the year are to be included in computing that taxpayer's income for the year. That, of course, is why the Appellant had to pay tax on the amount she withdrew.

[4]      When advising her of his decision the Minister made reference to subsection 14(4) of the Act, stating that it did not apply. That subsection reads as follows:

14(4)     Where in a current payment period a person who is an applicant, or who is an applicant's spouse or common-law partner who has filed a statement as described in paragraph 15(2)(a), suffers a loss of income due to termination or reduction of pension income, the person may, not later than the end of the payment period immediately after the current payment period, in addition to making the statement of income required by subsection (1) in the case of the applicant or in addition to filing a statement as described in paragraph 15(2)(a) in the case of the applicant's spouse or common-law partner, file a statement of the person's estimated income for the calendar year in which the loss is suffered, other than pension income received by that person in that part of that calendar year that is before the month in which the loss is suffered, in which case the person's income for the base calendar year shall be calculated as the total of

            (a)         the person's income for that calendar year, calculated as though the person had no pension income for that calendar year, and

            (b)         any pension income received by the person in that part of that calendar year that is after the month immediately before the month in which the loss is suffered, divided by the number of months in that part of that calendar year and multiplied by 12.

That provision could only assist the Appellant if the withdrawal could be considered to be "pension income". However, that expression is defined for purposes of the Act by section 14 of the Old Age Security Regulations.[3] Even the most generous reading of this definition cannot include the withdrawal of funds from a registered plan prior to its maturity. Specifically, it is not an annuity payment, because it is not paid on a periodic basis. Nor could it possibly fall into any of the other clauses of section 14.

[5]      I have also examined each of the other subsections of section 14 of the Act. It is clear that none of them could possibly be thought to cover this fact situation. I can only conclude that the Minister was correct to include the withdrawal in the Appellant's income for 2003, and the Commissioner of Review Tribunals will be so advised pursuant to section 44 of the Old Age Security Regulations.

[6]      I do not wish to leave this matter, however, without expressing the hope that the government might give consideration to proposing an amendment to the Act that would give some relief to persons in the Appellant's position. There are occasions when recipients of the guaranteed income supplement find it necessary to withdraw funds from a registered plan to meet an urgent need for cash. When that happens they are disadvantaged in two ways. Not only do they lose the benefit of the future annuity income that the funds withdrawn would otherwise have produced, but they also suffer a loss of benefits under the Act, as this Appellant has, even though the increase in their income resulting from the inclusion of the withdrawn funds is a temporary one-year increase. Much hardship might be avoided if the Minister's powers under the Act permitted him to base benefits on the Applicant's income exclusive of the funds withdrawn in proper cases.

Signed at Ottawa, Canada, this 8th day of August, 2005.

Bowie J.

APPENDIX "A"

14         For the purposes of section 14 of the Act, "pension income" means the aggregate of amounts received as

            (a)         annuity payments;

            (b)         alimony and maintenance payments;

            (c)         employment insurance benefits;

            (d)         disability benefits deriving from a private insurance plan;

(e)         any benefit, other than a death benefit, under the Canada Pension Plan or a provincial pension plan as defined in the CanadaPension Plan;

(f)         superannuation or pension payments, other than a benefit received pursuant to the Act or any similar payment received pursuant to a law of a provincial legislature;

(g)         compensation under a federal or provincial employee's or worker's compensation law in respect of an injury, disability or death;

(h)         income assistance benefits under an agreement referred to in subsection 33(1) of the Department of Human Resources Development Act by reason of a permanent reduction in the work force as described in that subsection; and

(i)          income assistance benefits under the Plant Workers' Adjustment Program, the Fisheries Early Retirement Program of the Northern Cod Adjustment and Recovery Program by reason of a permanent reduction in the workforce.