2018-0762381M4 Impact of WSIB benefits on OAS clawback

Principal Issues: Whether WSIB benefits should be included in income, and therefore, impact the calculation of the OAS clawback.

Position: Yes.

Reasons: The law - the wording in paragraph 56(1)(v), subsection 180.2(2), and the definition of "adjusted income" for the purpose of Part I.2 (tax on OAS benefits).

Author: El-Kadi, Randa
Section: 56(1)(v); 110(1)(f)(ii); definition of "adjusted income" in 180.2(1); 180.2(2)

July 23, 2018

XXXXXXXXXX

Dear XXXXXXXXXX:

Mr. Bob Hamilton, Commissioner of the Canada Revenue Agency, has asked me to reply to your correspondence about Workplace Safety and Insurance Board (WSIB) benefits and their impact on the old age security (OAS) clawback. Thank you for your understanding regarding the delay of this response.

Under the Income Tax Act, if a taxpayer receives compensation payments under an employees’ or workers’ compensation law of Canada or a province for an injury, disability, or death, the taxpayer must include these payments in their income. 

The Act generally allows an offsetting deduction to exclude the compensation payments described above in calculating the taxpayer’s taxable income. The income inclusion and the corresponding deduction from taxable income would generally have little or no net effect on income taxes.

However, the requirement to include WSIB benefits in income can affect benefits that are based on a taxpayer’s income, including the Canada child benefit and the goods and services tax/harmonized sales tax credit, as well as certain entitlements, such as OAS benefits.

The Act requires that OAS benefits be reduced when a taxpayer’s adjusted income is higher than an indexed threshold. Adjusted income is determined by the Act and, in general, is the taxpayer’s net income before deductions. Although a WSIB benefit payment received by an employee is deducted in calculating taxable income, it is included in the calculation of adjusted income for the purpose of calculating the OAS clawback. 

I appreciate the opportunity to respond to your concerns and trust the information I have provided is helpful.

Sincerely,

Geoff Trueman
Assistant Commissioner
Legislative Policy and Regulatory Affairs Branch

Randa El-Kadi
613-670-9054
2018-076238

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