CPP and old age pension considered taxable

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Pro Bono

Dear Tuma:

I used to work off reserve for many years and paid into the Canada Pension Plan (CPP). Now I am retired and living back home on the rez, but Revenue Canada tells me that I need to pay tax on my pension. I thought that this was non-taxable. Can you please tell me why they think my pension that I worked so hard for is now taxable?

Indians Pay Taxes Too

Dear Indians:

Yes, Indians do pay taxes too, contrary to popular belief, and the Canada Customs and Revenue Agency (CCRA) knows this all too well. The primary exemption that is available to status Indians is Section 87 of the Indian Act where it states that personal property of an Indian is not subject to taxation. Personal property includes income that is earned on a reserve or that is considered to be earned on a reserve, as well as goods bought on or delivered to a reserve.

There have been a number of court cases that have tried to clarify what exactly is included in this exemption and I am sure that there will more court cases in the future.

One of the ways that CCRA has responded is to issue guidelines called The Indian Act Exemption for Employment Income Guidelines. These guidelines are considered policy and provide direction for how CCRA will look at a particular taxpayer's situation.

In your case, your employment income was generated off reserve and is not eligible for the Section 87 exemption. The CPP is based on your taxable earnings and is considered by CCRA to be taxable.

I know you did not ask but I will also address the question of the old age pension and the old age supplement. CCRA takes the position that this pension is not related or connected to any previous income earned on reserve and that the payments are considered to be off reserve. The old age pension and the supplement are considered to be taxable income.

When filing your income tax return, make sure to utilize all your credits, deductions and it might be a good idea to talk to a tax preparer or an accountant to see how you can reduce the amount of tax payable.

Tuma

Dear Tuma:

I am renting a house and the property owner went bankrupt. Now the bank is foreclosing on the house and has asked us to pay the rent to them. I have no problem with this, but my problem is about my security deposit. The bank tells me that since I gave it to the property owner, I should try to get it from him and the property owner is nowhere to be found. Should I break the picture window and consider it even?

Caught In The Middle

Dear Caught:

Under no circumstances should you break the picture window. You might cut yourself or you may find that it may cost you more to replace the window. You may be charged with willful destruction of property or with mischief. I repeat, do not break the window.

As for the deposit, do not despair. Each province has a Residential Tenancy Act and most, if not all, have a provision to protect you in the event that the house is sold or foreclosed on. In your case, the Nova Scotia Provincial Tenancy Act states that the bank or financial institution is presumed to take over the obligations of the property owner. This means you can consider that bank to be the new owner and that it has the damage deposit.

Should you leave (I would suggest you start looking now) you can make a claim for the security deposit against the bank. If the bank does not return the money, you can file a complaint with the Residential Tenancies Board or file a claim in Small Claims Court.

Tuma

This column is not intended to provide legal advice, but highlight situations where you should consult with a lawyer. Questions can be sent to Tuma Young@eskasonibc.ns.ca