One of the requirements of the Canada Emergency Response Benefit (CERB) is that an individual must have earned at least $5,000 from employment or self-employment in 2019 or in the 12 months preceding the application date. But does this mean gross income or net income after expenses? That simple question has created a fiasco.
The Canada Revenue Agency (CRA) was uncertain of the answer when CERB was first introduced, but now says it means net income after expenses. It issued 441,000 letters in early December telling individuals that, based on the net income reported on their 2019 tax returns, they may have to repay all or a portion of CERB amounts received.
First, the CERB Act is separate legislation from the tax act or any other act, with its own definitions. But, incredibly, it does not define the term “income”: we must therefore look outside the CERB legislation for guidance. The best guidance regarding the meaning of “income” is not found in dictionaries (to which the courts often refer when the meaning of a word is not clear) but in one sentence of the tax act. That sentence says that, for tax purposes, a taxpayer’s “income” from a business means profit: in other words, it deems the word “income” to mean “net income” instead.
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