2015-0564201E5 Exempt payments in a support home

Principal Issues: Are payments exempt from tax under paragraph 81(1)(h), where the payments are received for the supports in a support home of a person with a XXXXXXXXXX disability?

Position: Question of fact and likely in this case.

Reasons: Must meet the requirements to be exempt under paragraph 81(1)(h).

Author: Robertson, George
Section: 81(1)(h), 250(1)(a)

XXXXXXXXXX
                                                                                                                                                       2015-056420
                                                                                                                                                       George A. Robertson,
                                                                                                                                                       CPA, CMA

May 19, 2015

Dear XXXXXXXXXX:

Re: Payments regarding a support home

This is in response to your correspondence regarding whether payments made to you to support a person who has a XXXXXXXXXX disability (the “XXXXXXXXXX”) in a support home are exempt from tax under paragraph 81(1)(h) of the Income Tax Act (the “Act”). We also acknowledge the telephone conversation (XXXXXXXXXX/Burnley) on January 19, 2015.

Based on your correspondence and the telephone conversation, we understand that you have received funds since XXXXXXXXXX, in connection with the XXXXXXXXXX under the XXXXXXXXXX (the “Program”). You are paid by the XXXXXXXXXX’s family using Program funding for providing a support home in which the XXXXXXXXXX resides and receives supports. You indicated that the XXXXXXXXXX resides in your support home for XXXXXXXXXX and resides with the XXXXXXXXXX’s parents the rest of the time.

It is also our understanding that the payments are authorized under the XXXXXXXXXX.

Our Comments

This technical interpretation provides general comments about the provisions of the Act and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R6, Advance Income Tax Rulings and Technical Interpretations.

Paragraph 81(1)(h) of the Act excludes from income social assistance payments that an individual caregiver (the “caregiver”) receives for the benefit of another individual (the “care recipient”) under that caregiver’s care. The care recipient can be either a child or an adult.  The amount the caregiver receives must meet all the following conditions to be excluded from income:

*     The payment is a social assistance payment ordinarily made on the basis of a means, needs, or income test.

*     The payment is made under a program provided for by federal, provincial, or territorial law.

*     The payment is received directly or indirectly by the caregiver for the benefit of the care recipient.

*     The care recipient must not be the caregiver’s spouse or common-law partner, or related to the caregiver or the caregiver’s spouse or common-law partner.

*     No family allowance under the Family Allowances Act or any similar allowance provided for by provincial or territorial law can be payable in respect of the care recipient for the period for which the social assistance payment is made.

*     The care recipient resides in the caregiver’s principal place of residence, or the caregiver’s principal place of residence must be maintained for use as the care recipient’s residence during the period for which the payment is made.

The term “social assistance” is not defined in the Act.  Generally, social assistance means aid provided by a government or government agency on the basis of need. It appears from the XXXXXXXXXX and the Program’s website that the funding under the Program is not determined by an actual financial means, needs or income test of the XXXXXXXXXX, but by a XXXXXXXXXX assessment. In general, it appears that individuals for whom funding is received under this program would not be capable of financially supporting themselves or living independently. Therefore, it is our opinion that the requirement under paragraph 81(1)(h) of the Act for the social assistance to be ordinarily based on a means, needs or income test can be satisfied by an implicit test applicable to adults with a developmental disability that began in childhood. 

For the purpose of paragraph 81(1)(h) of the Act, it does not matter if the social assistance payments are made directly by a government or government agency or if they are received indirectly through another organization. Therefore, if the payments are for social assistance, the fact that they are made indirectly through a funds administrator (e.g., the care recipient’s family) to the caregiver will not disqualify an amount that would otherwise qualify under paragraph 81(1)(h).

As noted in the last bullet, the care recipient must reside in the caregiver’s principal place of residence, or the residence must be maintained for the care recipient’s use, throughout the period for which the caregiver receives the payment. It is a question of fact in each case as to whether the care recipient resides in the caregiver’s principal place of residence. An individual’s principal place of residence is the place where the individual regularly, normally or customarily lives. For the purpose of paragraph 81(1)(h) of the Act, where the care recipient resides should be determined on the basis of whether the care recipient lives in the caregiver’s principal place of residence on a settled and usual basis. However, the requirement to live in the caregiver’s principal place of residence is not met in situations where the caregiver and the care recipient do not share common living areas in the residence.  

We trust that these comments will be of assistance.

Yours truly,

Pamela Burnley, CPA, CA
Manager - Tax Credits and Ministerial Issues
Business and Employment Division
Income Tax Rulings Directorate

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