OTHER SOURCES OF INCOME
56 (1) (a) i-iv Benefits in the nature of pensions
Any benefits received under Employment Insurance Act are taxable.
Income Splitting – Canada Pension Plan: who meet certain conditions can split equally their Canada Pension Plan income.
Amounts which can be shared is 50% of the combined CPP benefits received but prorated by the length of the time the individual have been living together. where one individual was a contributor and the other was not, then the non-contributor must be at least 60 years of age at the time of this election.
Income Splitting – Pension Income: Up to one-half of the individual’s pension income that qualifies for the pension income tax credit.
For individuals aged 65 and over eligible pension income includes annuity payments under a RPP, RRSP, and DPSP out of RRIF.
56 (1) (a) ii Retiring allowances and other payments on termination of employment
The general principle is that all other payments on the termination of employment are taxable as a retiring allowance.
The definition of Retiring allowance excludes pension income and death benefits, but includes payments such as:
-retirement from an office or employment for long service
- loss of office including court awarded damages received by the taxpayer
56 (1) (b) Support receipts and payments
Overview
The spousal support income inclusions and deduction are mirror images of each other. The recipient of spousal support has an inclusion, while the payer has a deduction. The Recipient of child support has not inclusion and the payer has no deduction.
Spousal Support – Conditions
Support amounts ,except amounts that related to child support, are deductible if the following 5 test are met if payments are :
• Made as allowances on periodic basis
• Made for the maintenance of the recipient
• Recipient has discretionary use of the amounts
• Made to spouse or former spouse or paid by a natural parent of a child of the recipient
• Pursuant to an order of a competent tribunal or written agreement.
Definitions
Three conditions must be met for an amount to be regarded as an allowance in the Court’s view:
• Amount must be limited and predetermined
• Amount paid allows recipient to pay certain type of expense
• Recipient allowed to spend payment in any way
All these provision require that the payments be made on a periodic basis.
Child Support: Amounts paid in respect of support or maintenance of a child are not deductible by the payer and are not included in the income of the recipient.
Legal Fees connection with Support payments
Legal fees incurred to enforce pre-existing rights to support payments are deductible.
56 (1) (d) Annuity payments
The full amount of annuity payment is included in income unless it is required to be included under another provision of the ACT.
If full amount is included then capital portion is deducted.
56 (1) (h),i,q,t – Amounts received from deferred income plans
Inclusions provisions:
56(1) (h) Registered Retirement Savings Plan - RRSP
56(1) (h.1) Home Buyer’s Plan - HBP
56(1) (h.2) Lifelong Learning Plan - LLP
56(1) (i) Deferred Profit Sharing Plan - DPSP
56(1) (q) Registered Education Savings Plan - RESP
56(1) (q.1) Registered Disability Savings Plan - RDSP
56(1) (t) Registered Retirement Income Fund – RRIF
Registered Education Savings Plan (RESP):
Allows individuals to contribute, without an annual limit to a plan to fund post secondary education of a beneficiary.
Life time contribution limit is $50,000 over max of 31 years.
Its 35 years if beneficiary is entitled to a DTC.
Contributions are not deductible when contributed to the plan and not taxable when the plan allows their withdrawal.
Accumulated investment income is taxable to a beneficiary as he receives the funds to pay for education expenses while enrolled as a full time student in post secondary education. Known as “Educational Assistance Payments”.
Income earned in the RESP and CESG amount is