2024-1008891E5 XXXXXXXXXX One-time relief payment

Principal Issues: What is the tax treatment of one-time rebate to individuals and families under the XXXXXXXXXX one-time rebate program and how to report it?

Position: Likely included in the recipients income under paragraph 56(1)(u) with an offsetting deduction from taxable income, pursuant to paragraph 110(1)(f). Likely not required to report on T5007 pursuant to 233(2)(f) or (g) of the Income Tax Regulations.

Reasons: Assistance appears to be a social assistance made on the basis of a means, needs or income test.

Author: Yao, Xiaowan
Section: 56(1)(u), ITR 233(1), ITR 233(2)

XXXXXXXXXX                                                                 2024-100889
                                                                                         Fanta Yao, CPA, CGA

July 11, 2024

Dear XXXXXXXXXX:

Re: XXXXXXXXXX One-time Relief Program

This is in reply to your email requesting our guidance on the tax treatment of a one-time relief program that was to be offered by the XXXXXXXXXX.

The one-time relief program is an application-based program that will pay eligible individuals and families a one-time $300 rebate if their net family income for the year for 2022 or 2023 did not exceed $70,000, and they had at least $3,000 in family working income (such as employment income, self-employment income, scholarship/bursaries, tax-exempt income for emergency service volunteers etc.) for that tax year.

Our Comments

This technical interpretation provides general comments about the provisions of the Income Tax 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 70-6R12, Advance Income Tax Rulings and Technical Interpretations.

Given the limited information available, we are prepared to provide the following general information.

Paragraph 56(1)(u) of the Income Tax Act (Act) requires that social assistance payments received in the year and made on the basis of a means, needs, or income test are to be included in a taxpayer’s income unless such amounts are required to be included in the taxpayer’s income or the income of the taxpayer’s spouse or common-law partner under a different provision of the Act. Amounts included in a taxpayer’s income under paragraph 56(1)(u) of the Act are offset by a matching deduction under paragraph 110(1)(f) of the Act, so that there are no income tax implications related to this income inclusion other than it may affect certain income-tested benefits.

The first requirement in paragraph 56(1)(u) of the Act is that the amount must be “social assistance”. The term “social assistance” is not defined in the Act but generally means aid provided by governments or government agencies, although it can also be provided by other organizations (such as a charity), on the basis of need. Based on the limited information provided, the assistance under the one-time relief program would likely fall within the general meaning of social assistance.

The second requirement in paragraph 56(1)(u) of the Act is that the payment must be “made on the basis of a means, needs or income test.” We consider each one of these tests to be a financial test and they are described as:

1. An “income” test, which is a test based solely on the income of the applicant.

2. A “means” test, which is similar to an income test, but also takes into account the assets of the applicant.

3. A “needs” test takes into account the income, assets and financial needs of the applicant.

The information provided states that the eligibility criteria for the one-time relief program would include an income test. Therefore, the assistance would likely be considered a social assistance payment included in the income of the recipient pursuant to paragraph 56(1)(u) of the Act. As noted above, this amount would be offset by a matching deduction under paragraph 110(1)(f) of the Act, so that there are no income tax implications related to this income inclusion other than it may affect certain income-tested benefits.

When an organization concludes that it has made social assistance payments as described in paragraph 56(1)(u) of the Act to an individual, subsection 233(1) of the Income Tax Regulations (Regulations) requires the organization that provided the social assistance to report the payment on Form T5007, Statement of Benefits (T5007) unless the payment is specifically excluded from this reporting requirement.

Subsection 233(2) of the Regulations excludes from the reporting requirement, among other things, payments that are not a part of a series of payments, or that are paid in a year as part of a series of payments but total less than $500 in the year. If there will not be any other similar payments made in the same tax year to individuals under the same program of XXXXXXXXXX, and the total amount of such payments would not exceed $500, the single $300 relief payment is likely not required to be reported on T5007. It is the Canada Revenue Agency’s policy that where a T5007 is not required to be issued to the recipient of the social assistance payment, the payment is not required to be reported on the recipient’s income tax and benefit return. As a result, any income tested benefits would not be impacted.

Yours truly,

Eric Wirag, CPA, CMA
Manager, Tax Credits and Ministerial Issues
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

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