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Return to First Part of Chapter

8. Other Exemptions from Income

(a) Rent Received From a Child or Grandchild in Receipt of Social Assistance

Where a recipient provides accomodation to a child or grandchild of the recipient (or their spouse) in the benefit unit, and where the child or grandchild is a recipient of either welfare or ODSP on their own (ie. within a separate benefit unit), then money received for rent or boarding is not chargeable income to the parent or grandparent [Reg s.39(2)]. (see s.4(f): "Rent Paid to a Claimant: Income Exemption For Children and Grandchildren on Social Assistance on their Own", above).

Note however that such co-resident children who are on welfare (Ontario Works) are not able to collect any shelter component in their assistance (see the welfare program at Ch.3, s.12: "Assistance: Living with Parents").

(b) Hardship Payouts under Pension Benefits Act

Under some circumstances (financial hardship) persons may access pension funds otherwise "locked-in" under the provincial Pension Benefits Act. While there is no legal duty to access these funds under the general social assistance "duty to realize available assets", their income and asset chargeability treatment WHEN the funds are in fact accessed is less clear.

See Ch.8, s.6: "Asset Rules: Duty to Realize Available Financial Resources" for a fuller discussion of these issues, and the income and asset treatment of such monies.

(c) Personal Injury-Type Awards

The following payments are exempt from income chargeability to an aggregate maximum of $100,000 [Reg s.43(1)(2)]:
  • damages or compensation for pain and suffering from injury or death to a member of the benefit unit (also known as "general damages") [Reg s.43(1)4],

  • actual and future expenses related to such injury or death [Reg s.43(1)4] (also known as "special damages" and "disbursements");

    Following on the case of Director, ODSP v Passaro (Div Ct, 2010), these provisions were amended to clarify that "non-earner benefits" (NEBs), granted under the motor vehicle accident provisions of the Insurance Act (specifically under the Statutory Accidents Benefits Schedule, or SABS), did not fall within the meaning of "pain and suffering", and as such did not fit within this $100,000 income exemption. The net result is that any funds from NEB awards are fully chargeable for income purposes. This rule applies to past NEB (or NEB-like) awards made under their various manifestations through the following sequential SABS provisions [Reg 43(3)]:

    • Subsections 13 (1), (2), (3), (7) and (8) of Regulation 672 of the Revised Regulations of Ontario 1990 (Statutory Accident Benefits Schedule — Accidents before January 1, 1994) made under the Insurance Act ["Benefits if No Income"].

    • Section 19 of Ontario Regulation 776/93 (Statutory Accident Benefits Schedule — Accidents after December 31, 1993 and before November 1, 1996) made under the Insurance Act ["Other Disability Benefits"].

    • Section 12 of Ontario Regulation 403/96 (Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996) made under the Insurance Act ["Non-Earner Benefits"].

    • Section 12 of Ontario Regulation 34/10 (Statutory Accident Benefits Schedule — Effective September 1, 2010) made under the Insurance Act ["Non-Earner Benefits"]

  • "dependent" damage awards under the Family Law Act to compensate for loss of guidance, care and companionship as a result of death or injury [Reg s.43(1)4.1]; and

  • amounts received as compensation for non-economic loss under section 46 of the Workplace Safety and Insurance Act, 1997 or section 42 of the Workers' Compensation Act ("NEL" awards) [Reg s.41(13)] [see s.7(a): "Payments from Ontario"].
The most common use of this exemption is when a motor vehicle claim is settled or won at trial [see s.11(a) "Motor Vehicle Accident Settlements and Awards", below].

This $100,000 cap may be exceeded with approval of the Director for income used or to be used for [Reg s.43(2)]:
  • expenses actually and reasonably incurred or to be incurred as a result of injury to or the death of a member of the benefit unit,

  • Director-approved expenses for disability related items or services for a member of the benefit unit, including disability-related education or training expenses.

    Note as well that the Director will require that such income - in order to be treated as non-chargeable - be set out in an annual report filed by the recipient documenting "all income and expense transactions relating to the assets for the year" [Reg s.43(5)].
The issue of the income treatment of interest accruing on lump sum pain and suffering awards is discussed in s.11(d) ["Common Income Situations: Interest on Retroactive Lump Sum Payments"], below.

(d) Special Agreements

Payments from the following settlement agreements are exempt from treatment as income [Reg.43(1) paras.5,14,16,17]:
  • The Helpline Reconciliation Model Agreement;

  • The Multi-Provincial/Territorial Assistance Program Agreement;

  • The Grandview Agreement;

  • Ontario Hepatitis C Assistance Plan (applies where recipient contracted the disease before 01 January 1996 and after 30 June 1990);

  • lump sum payments received under the 1986-1990 Hepatitis C Settlement Agreement of 15 June 1999, except payments for loss of income or loss of support(applies where recipient contracted the disease between 1986 and 1990);

  • A payment received under the Pre-1986/Post-1990 Hepatitis C Settlement Agreement (December 14, 2006), except those: for loss of income under section 2.05 of the Agreement, loss of services under section 2.06 of the Agreement and compensation to dependants under section 4.04 of the Agreement;

  • Walkerton Compensation Plan, except payments for future loss of income;

  • the Government of Alberta as compensation for sterilization.

  • amounts received as compensation (except compensation for loss of income) related to a claim of abuse sustained at an Indian residential school, including compensation received under the Indian Residential Schools Settlement Agreement.

  • "personal credits" under the Indian Residential Schools Settlement Agreement.
(e) Administrator-Approved Expenditures

Income received from the sale or disposition of an asset that has been put towards, or - if the Director approves - will be put towards [Reg s.43(1) para.6]:
  • purchase of a principal residence by a member of and for the use of the benefit unit;

  • assets which are, in the opinion of ODSP, necessary for the health or welfare of a member of the benefit unit;

  • the purchase of an asset that is an "exempt asset" for the purposes of determining asset maximums (See Ch.8: "Asset Rules"); or

  • the purchase of an asset that does not put the recipient over the asset cap (see Ch.8 "Asset Rules").
Also exempt from income chargeability are "payments from a trust or from a life insurance policy, gifts or other voluntary payments" or payments "made pursuant to a court order or under a government funded program" that - assuming they are not otherwise reimbused - have been put towards, or - if the Director approves - will be put towards [Reg 43(1)9,9.1]:
  • expenses for disability related items or services for a member of the benefit unit;

  • disability-related education or training expenses.
(f) Twelve-Month $6,000 Income Exemption

ODSP treats the following income as non-chargeable, if received in any twelve-month "running period", to a total amount of $6,000 [Reg s.43(1)13]:
  • trusts pay-outs;

  • life insurance policies;

  • gifts, and

  • other "voluntary payments".
A twelve-month "running period" does not correspond to a calendar year, but counts back twelve months from any date being considered. For instance, if you are looking at this income exemption at 18 February 2009, consider such payments between 19 February 2008 and 18 February 2009.

For example, assume the present date is 01 July 2009 and the recipient received $4,000 cash gift in August of 2008 and a $3,750 trust payment in May 2009. Under these facts the recipient has exceeded their $6,000 annual income exemption by $1,750, which surplus will be treated as chargeble income. Further, any more such payments in July 2009 will also be fully chargeable (unless otherwise exempt).

However assume the same facts but change the present date to September 2009. Then the recipient has $2,250 "available" in their exemption because only the May 2008 trust payment of $3,750 "counts" against them - the August 2008 payment now being more than twelve months ago.

What the recipient must do is constantly keep in mind how much of this exemption has been "used" in the past twelve month as a "running" total.

As mentioned in Ch.6: "Information Eligibility", it is safest as a general rule to clearly report ANY amounts received so that ODSP might make its determination as to how to treat such monies. While this might result in reduction, suspension or cancellation of income support, a failure to do so runs the additional risk of overpayment assessment - and even criminal fraud charges. If the recipient disagrees with ODSP's treatment of the income it should then be pursued through the appeal system (see Ch.12: "Appeals and Other Remedies").

(g) Charitable-Type Donations

Subject to a limit (explained below), donations from "religious, charitable or benevolent organization" are exempt income [Reg s.43(1)7].

The limit is determined in an unusual way and can be a bit tricky. First, there is a $100,000 trust ASSET exemption [see Ch.8, s.6 "Asset Rules: Trust Funds"] for the value of any testamentary and life insurance trusts, together with the cash surrender value (uncashed) of any life insurance policy.

The charitable donation income exemption limit is the amount of "room" left in this $100,000 asset exemption - BUT not counting the "usage" of the asset exemption for life insurance surrender value. So the calculation for the charitable donation INCOME exemption is $100,000 minus the value of any chargeable testamentary or life insurance proceeds TRUSTS [Reg s.43(4)]. Another way of stating it is: the "room" remaining in the asset exemption, once you eliminate any "room" used by the cash surrender value of any life insurance policies.

For example, if the recipient is "using" $95,000 of the $100,000 asset exemption by the existence of an otherwise chargeable $95,000 (ie. non-Henson) trust, then a charitable gift of $6,000 would exceed the charitable donation income exemption, while a donation of $4,000 would not.

But if the asset exemption was 'used' by a $75,000 chargeable trust, and $20,000 of cash surrender value in a life insurance policy - then even the $6,000 charitable gift would be exempt (remember, the life insurance value doesn't 'count' for these purposes).

Typically charitable donations are much smaller in amount that this so this maximum would normally only operate when the recipient is at or very close to using all of the asset maximum. Thus a recipient with a $100,000 chargeable trust who receives a $100 charitable donation would find it treated as chargeable (unless it is otherwise exempt).
Note: Do not confuse this $100,000 Trust Asset exemption with the $100,000"personal injury-type awards" income discussed in s.8(c) above.

Note: For the INCOME treatment of trust funds and trust pay-outs, see the Annual $6,000 Income Exemption, s.8(f) above.
(h) Home and Vehicle Modification Grants

The Ministry of Community and Social Services runs a program entitled the "Home and Vehicle Modification Program". Grants received under this program are exempt as income [Reg s.43(1)19].

(i) Disaster Relief Committee Payments

The Ministry of Municipal Affairs and Housing runs a program entitled the "Ontario Disaster Relief Assistance Program". Payments from local committees under this program are exempt income, other than payments for loss of income [Reg s.43(1)21].

(j) Insurance Payments
IMPORTANT NOTE:

Insurance-type payments can often be large and have a significant impact on a person's on-going eligibility with ODSP. It is normal for such awards to be handled by a lawyer who can properly structure the award or settlement to maximize ongoing ODSP eligibility, and to advise the recipient of the impact of the payments. Recipients anticipating such awards or settlements should seek the help of a lawyer PROMPTLY on becoming aware of the potential income.
. Insurance Payments on Loss

Pay-outs by insurance companies for "loss of or damage to real or personal property" - if the money is applied to - or with Director approval will be applied to any of the following [Reg s.43(1)20]:
  • purchase or repair of s.28 exempt assets (see Ch.8 "Asset Rules";

  • purchase or repair of any asset necessary for the health or welfare of a member of the benefit unit, as approved by the Director;

  • the purchase of repair of an asset whose ownership by members of the benefit unit does not put the benefit unit over the asset cap (see Ch.8 "Asset Rules");

  • additional living expenses, including temporary shelter costs, if insurance-covered damage renders the recipient's primary residence unfit for habitation; or

  • debt obligations of a member of the benefit unit.
. Life Insurance Payments on Death

Recipients receiving life insurance pay-outs should review "annual $5,000 income exemption" above, and the related asset trust provisions [Ch.8, s.6 "Asset Rules: Trust Funds"].

. Life Insurance Interest or Dividends

Also exempt as income are interest or dividends from life insurance policies that [Reg s.43(1)11]:
  • are re-invested in the policy,

  • are used to pay the policy premiums, or

  • if approved by the Director, used for disability related items or services, or disability-related education or training expenses.
Note as well that the Director will require that life insurance interest or dividends income - in order to be treated as non-chargeable - be set out in an annual report filed by the recipient documenting "all income and expense transactions relating to the assets for the year" [Reg s.43(5)].

. Personal Injury-Type Awards

Recipients claiming or receiving large scale personal-injury type damage awards or settlements, and similar WCB/WSIB (NEL) payments should review s.8(c) "Personal Injury-Type Awards" above, and the related asset provisions [Ch.8, s.3(i): "Asset Rules: Pain and Suffering Damages and Expense Awards"].

(k) Trust Income

. Trust Principal Pay-outs

See the discussion of the "Twelve-Month $6,000 Income Exemption", s.8(f), above.

. Asset-Exempt Trust Income

Chapter 8, s.5: "Asset Rules: Trust Funds" discusses the $100,000 asset exemption for trust funds derived from testamentary (ie. will or estates) or life insurance proceeds. It is common for such trusts to provide for the payment to the beneficiary of interest accumulating on the "principal" sum of the trust, often on an annual basis.

This section discusses the treatment of "income" (typically "interest") from such trusts.

Income (typically interest) from such asset-exempt trusts is not chargeable if it is [Reg s.43(1)10]:
  • re-invested in the trust, or

  • if approved by the Director, used for disability related items or services, or disability-related education or training expenses.
Note as well that the Director will require that such trust income - in order to be treated as non-chargeable - be set out in an annual report filed by the recipient documenting "all income and expense transactions relating to the assets for the year" [Reg s.43(5)].

For the purposes of assessing such trust income (as opposed to "principal")treatment, pay-outs that are made on a periodic basis (eg. annually) will be attributed or "spread" over the months to which they apply. If such a report is filed as required then the income will be spread over the 12 months after the report is filed. If no report is filed then the income will be spread over the 12 months following the payment of the income [Reg s.43(6)].

. Income to Recipient AS Trustee

Occasionally a recipient or member of the benefit unit is a "trustee" for someone else (the "beneficiary"). While monies received and held for such a "beneficiary" are held in the name of the trustee, they are not really the trustee's money and are held only "beneficially" for the beneficiary. Such monies are not typically "available" (see the discussion of that term in Ch.8, s.5: "Asset Rules: Trust Funds") to the ODSP benefit unit and thus are neither their income or their assets.

ODSP will be particularly suspicious in such cases to ensure that such trust monies are not actually being used by the benefit unit. Situations where the beneficiary is WITHIN THE BENEFIT UNIT can be complex (as, depending on the terms of the trust deed, the funds MAY be available). In such cases the help of a lawyer should be sought.

A case factually-similar to that of a recipient AS trustee was Director (ODSP) v Favrod [2006] OJ #653 (QL) where an ODSP disabled adult recipient lived with her mother, where the mother was not herself receiving social assistance. The separated father made payments to the mother originally styled as "child support", which the Director wanted to deduct in accordance with normal practice that the support was being paid "on behalf" of the offspring. The Tribunal held - later supported by the court - that the "support" was in fact income to the mother to assist her as a care-giver with the extraordinary duties which she faced - and not income to the recipient, thus avoiding deduction of the income from the recipient's income support.

(l) Interest on Basic Exempt Assets

Chapter 8, s.2 (and 3): "Asset Rules" sets out the basic asset exemptions for ODSP recipients. Interest earned on such exempt basic assets is not chargeable income [Reg s.43(1)8].

(m) Payments for Non-Benefit Unit Child

Where members of the benefit unit receive monies for a child who is not a member of the benefit unit, and where such payments are approved by the Director, such payments are exempt income [Reg s.43(1)12]. Such payments might typically include monies paid where the recipient has temporary care of the child in arrangements with a Children's Aid Society of the Ministry (see the welfare program, Ch.3, s.11: "Basic Assistance: Minors in Temporary Care"), or where the recipient in acting as trustee under a private trust for a non-resident child (see "Income to Recipient AS Trustee", above).

(n) Registered Disability Savings Plan (RDSPs) Income

In 2008, the Income Tax Act created RDSPs, which operate as a tax deferral mechanism similar to RRSPs.

Payments made to a recipient by third parties which are intended for RDSPs, which are applied to RDSPs within a reasonable time, AND which comply with Income Tax requirements respecting RDSPs - are exempt from chargeability as income [Reg s.43(1)15.4, 43(5.1)]. This is also the case with interest in an RDSP which is rolled-over back into it [Reg s.43(1)(15.5)].

Most significantly, withdrawals by a recipient from an RDSP are also exempt income (though they are taxable) [Reg s.43(1)15.6].

(o) Energy Efficiency Grant, Items or Services

The value of grants, payments, credits, services or items provided by or in accordance with a program funded by gas distribution utilities, local distribution companies, a municipality, the Independent Electricity System Operator, the Ontario Energy Board, the Government of Ontario or the Government of Canada, for the purposes of energy efficiency, conservation or affordability [Reg 43(1)25].

(p) Nova Scotia Home for Colored Children Settlement Agreement

Payments received by a class member from the Nova Scotia Home for Colored Children Settlement Agreement.


9. Loans as Income

(a) The Legal History of Loans as Income

(i) "Income" Defined

The issue of whether loans received by a recipient are "income" is a vexed one. No where does it plainly state in the present law that loans are "income". Instead, we have to try to figure it out from the general "income" definition, which states:
Reg 37(1)
... income [is] .... the total amount of all payments of any nature paid to or on behalf of or for the benefit of every member of the benefit unit ...

37(2) For the purposes of subsection (1), income shall include the monetary value of items and services provided to the members of the benefit unit as well as amounts of income deemed to be available to members of the benefit unit.
In my view, and in light of the following analysis, the strongest legal argument is that "loans" ARE income. The rest of subsection (a) is devoted to a discussion of that legal issue. What ODSP views as loans is discussed in sub-section (b) below, and chargeability exemptions from that are covered in subsection (c) below.

(ii) Rubino v Metro Toronto

In a 1992 court case, Rubino and Metro Toronto 11 OR (3d) 289 (Div Ct, 1992), the court considered this issue in the context of a private loan to a recipient under the old General Welfare Assistance Act - the predecessor to the Ontario Works Act. In that case a two-judge majority (a further judge disagreeing) held that the term "payments" does not, in normal usage, include loans - and therefore the court did not count loans received as chargeable income against the recipient.

The statutory wording that the court examined in Rubino was similar to the present wording, quoted above. I repeat it here:
s.13(1)
.... the income of an applicant or recipient shall include all payments of any nature or kind whatsoever ...
It also included a further passage:
s.13(2)
For the purposes of subsection (1) and without restricting the generality of subsection (1), income shall include,

...

3. subject to subsections (4) [revoked] and (7), all payments received under a mortgage, agreement for sale or loan agreement;
This second passage regarding mortgage, loan and similar payments is not repeated in the present ODSP legislation. In Rubino the court considered whether the mention of "payments" in that paragraph referred to loan advances (ie. the initial giving of the loan monies to the debtor) or loan payments (ie. repayment to the creditor). In so doing it examined dictionary definitions of the term "pay" and "payment".

In reaching it's conclusion that the term referred only to loan RE-payments given by the borrower BACK to the lender (and thus only chargeable if the recipient WERE the lender), the court applied the well-established statutory interpretation principles that statutory language should be given it's "ordinary and natural meaning" and that any ambiguity (uncertainty) in the interpretation of benefits-conferring legislation (as here) should go in favour of the benefits-recipient. This latter principle has been re-affirmed by the Supreme Court of Canada in the case of Rizzo v Rizzo Shoes [1998] 1 SCR 27.

(iii) 1993 Post-Rubino Amendments

The story continues. Shortly after Rubino (December 1993) the provincial cabinet amended the (then General Welfare Assistance Act) regulation to EXPRESSLY include loan amounts as income so that it read:
s.15(2)
For the purposes of subsection (1) and without restricting the generality of subsection (1), income shall include,

....

15.2 proceeds of any loan except, with the approval of the welfare administrator, any portion that is applied or will be applied to the operation of a business;
The case of R v Adeti-Bastine [1998] OJ #5269 (QL)(OCJGD, 1998) considered this new wording. The defendant was charged with criminal fraud for collecting welfare while not declaring his student status or student loans. While the defendant raised Rubino in his defense, the court dismissed
this argument for several reasons.

The first was that the law applying to the case was the 1993 post-Rubino amended law, which included loans expressly within the definition of income (the court accepted that "proceeds of [a] loan" meant loan 'advances'). Secondly, a specific income exemption applied for the tuition, fees and books portion of student loans - implying (under an "implied exclusion" argument, see below) that any other component of student loans (such as living expenses) were "chargeable income". Thirdly, Adeti-Bastine was criminally liable just for failure to declare his student status, itself a fraudulent and disentitling omission.

(iv) Present Law and the Implied Exclusion Argument

However, the 1993 amendment was over thirteen years ago and since then the province re-drafted all of its social assistance legislation in 1997, creating the Ontario Works Act, the Ontario Disability Support Program Act and the new regulations under it. The new law has removed the express inclusion of loans within the definition of "income". This has greatly confused matters, raising the possibility that Rubino MAY now once again be good law as it applies to the definition of the key term: "payments" as it occurs in the present s.37(1) of the ODSP Regulation.

That said, the new ODSP general regulation does integrate some of the intent and language of the 1993 GWA amendment quoted above, though it has been re-located to the 'exclusions' portion of the regulation, which reads in the relevant part:
s.43(1)
The following shall not be included in income:

1. That portion of a loan, approved by the administrator, that is,

i. applied or will be applied to the operation of a business,

ii. applied on an exceptional basis for medically necessary health related reasons if no other government program is available for the purpose,

iii. applied to expenses approved by the Director for disability related items or services,

iv. taken against a life insurance policy if that portion is or will be used for disability related items or services approved by the Director,

v. guaranteed under section 8 of the Ministry of Training, Colleges and Universities Act or made under the Canada Student Financial Assistance Act and, in either case, received by or on behalf of a student and relating to tuition, other compulsory fees, books, instructional supplies, transportation or child care for the purpose of the definition of "education costs" in subsection 1 (1) of Regulation 774 of the Revised Regulations of Ontario, 1990 (Ontario Student Loans made before August 1, 2001) made under the Ministry of Training, Colleges and Universities Act or for the purpose of section 11 of Ontario Regulation 268/01 (Ontario Student Loans made after July 31, 2001) made under that Act,

vi. guaranteed under section 8 of the Ministry of Training, Colleges and Universities Act or made under the Canada Student Financial Assistance Act, if, in either case, the proceeds are received by or on behalf of a student who is,

A. a part-time student,

B. a dependent adult who is not a spouse included in the benefit unit, or

C. a sole support student as defined in subsection 1 (1) of Regulation 774 of the Revised Regulations of Ontario, 1990 made under the Ministry of Training, Colleges and Universities Act,

vii. applied or will be applied to the payment of first and last month"s rent necessary to secure accommodation for the benefit unit,

viii. applied or will be applied to the purchase of an asset exempt under subsection 28 (1), or

ix. applied to the purchase of household items necessary for the well-being of one or more members of the benefit unit and approved by the Director.
This extensive 'exempting' of some loan proceeds from chargeability opens up an "implied exclusion" argument to capture some or all loans as chargeable income. The 'implied exclusion' argument is a well-recognized principle of statutory interpretation that says the present regulation, by expressly making some loans exempt within s.43(1), logically and necessarily implies that all others are chargeable.

Unfortunately, the implied exclusion issue was not considered in argument in Rubino, and was not reflected in either the majority or the dissenting judgment. It may not have been available under the wording of the law that existed at that time.

The principle was however applied by the court in R v Adeti-Bastine, along with other arguments, to capture non-exempt student loans within chargeable income. Whether it will be extended beyond student loans, or defeated by the ambiguity principle from Rizzo, is an open issue.
Note:
While not entirely on point, another case does bear mentioning here. In R v Maldonado [1998] OJ #3209 (QL) OCJ - Prov Div), the criminal court considered a similar fact situation in a charge of criminal fraud against a person who received both welfare and student loans at the same time. The court in Maldonado mentioned the principle in Rubino only in passing as it too dealt with the 1993 amended regulation. Nonetheless the court dismissed the charge, finding that an element of the fraud offence, that of knowing that the government would be deprived of money, was missing - as the defendant did not know that the student money was chargeable income. The court took great care to distinguish this from a 'ignorance of the law' defence, which is barred under the criminal code.

The Maldonado case is essential reading for any criminal lawyer dealing with a social assistance fraud case (see Ch.14 "Fraud and Prosecutions").
(v) Summary

In summation, the legal status of loans as chargeable income remains unclear - although in my view the stronger argument is that loans are NOW chargeable income, unless expressly exempted (as below).

It is unfortunate that this crucial issue has not been made clear in law, as it was for a time after Rubino. It will be for a future court to resolve the conflict between competing principles of statutory interpretation. In the meantime recipients should be cautioned not to reach their own conclusions on this issue and act on them unilaterally. By far the safer course is to report all income - from loans advances, repayments or otherwise - and challenge any unfavourable interpretations through the proper appeal mechanisms of the Social Benefits Tribunal (see Ch.10 "Appeals and Other Remedies").

(b) Types of Loans

The complex forms of today's personal finances can strain the definition of what is and isn't a loan. That said, ODSP views the following a "loans", and subject to general chargeability unless avoided by the exemptions listed below:
  • conventional loans (eg. a fixed amount of cash from any sources: bank, credit union, even private);

  • credit card use (measured by the amount of outstanding credit card bills);

  • lines of credit use ("planned overdrafts");

  • unplanned overdrafts;

  • conditional (time payment) sales agreements. Such as buying furniture or appliances on 'buy now/pay later' terms.
  • True "debit cards", where monies are deducted directly from an account would not be "loans" as they are equivalent to cash expenditures.

    With respect to the last item (conditional sales agreements) recall that "income shall include the monetary value of items and services provided to the members of the benefit unit" [Reg s.37(2)].

    If one accepts the basic premise that loans are income, it seems reasonable to include all these various forms of credit as "loans".

    (c) Exempt Loan Income

    Again, on the assumption that loans generally are chargeable income (which is plainly the legal position of the ODSP Director), this sub-section reviews what loan income is treated as exempt from income "chargeability".

    Note that any income - loan, grant or otherwise - relating to students or education is covered in s.10 "Student and Education Related Income", below.

    These loan exemptions were listed in the quote from s.43 of the Regulation above. They include that portion of a loan, as approved by the Director:
    • for the present for future operation of a business;

    • on an exceptional basis, for medically necessary health related reasons if no other government program covers the need;

    • for the payment of first and last month's rent necessary to secure accommodation for the benefit unit;

    • for disability-related items or services, including where such loans are taken against life insurance policies;

    • for the purchase of any asset that is an exempt asset under ODSP law (see Ch.8 "Asset Rules"); and

    • for the purchase of household items necessary for the well-being of one or more members of the benefit unit.
    As well - a loan, forgiven loan or contribution received from the "Residential Rehabilitation Assistance Program" under the National Housing Act (Canada) is exempt income [Reg s.42(13)].

    Note that most of the exemptions are defined by the "purpose" of the loan. In all such cases therefore it is advisable to obtain the Director's position on the treatment of the "loan" beforehand.


    10. Student and Education-Related Income

    (a) Overview

    Before exploring student and education-related income treatment it is worth noting that ODSP recipients, unlike welfare (Ontario Works) recipients, are generally free to enrol and attend school programs without impact on their eligibility (something which should be mentioned in any ODSP medical eligibility appeal before the Social Benefits Tribunal). Welfare recipients who are single (ie. non-spousal) full-time students of post-secondary schools (eg. community colleges and universities) are INELIGIBLE for welfare if they are receiving either an OSAP or a Canada Student loan, OR if they are not eligible for such a loan due to parental income or past default in payment of such loans [Reg s.9] (see the welfare program at Ch.2 "Claimants: Post Secondary Students").

    On this topic note that dependent adult students [but NOT spouses] within an ODSP benefit unit - if they have student funding eligibility - are obliged to pursue it under the 'duty to realize available financial resources' rules (see Ch.8, s.6: "Asset Rules: Duty to Realize Available Resources") [Reg s.11(2)(b)].

    The chargeability treatment of student funding once received is as set out in this section.

    (b) Student and Education-Related Income Treatment

    The following student loans, or portions thereof, are exempt income:
    • provincial and federal government-guaranteed student loans, but ONLY the portions for tuition, compulsory fees, books, instructional materials, transportation and child care [Reg s.43(1)1(v)];

    • any portions of government-guaranteed student loans to:

      - part-time students,
      - dependent adults in the benefit unit,
      - single parents [Reg s.43(1)1(vi)];

    • other Director-approved loans for training or post-secondary education of a member of the benefit unit that are or will be promptly applied to the cost of tuition, fees, books, instructional supplies, equipment, transportation or child care for the intended program [Reg s.43(1)2.1].
    In addition, some non-loans are exempt as well:
    • provincial awards or grants from the Ministry of Training, Colleges and Universities to post-secondary students [Reg s.43(1)2];

    • a bursaries granted under the Education Act to a full-time secondary student [Reg s.43(1)3];

    • other Director-approved awards or grants for training or post-secondary education that are or will be applied to the cost of tuition, fees, books, instructional supplies, equipment, transportation or child care for the intended program [Reg 43(1)2.1].

    • interest earned from and reinvested into a Registered Education Savings Plan [Reg s.43(1)15] (see Ch.8 "Asset Rules" for the exempt asset status of such Plans).

    • A "Canada Education Savings Grant". These grants are paid directly into Registered Education Savings Plans (RESPs) [Reg s.42(11).

    • a gift or voluntary payment received for the purpose of making a contribution to a Registered Education Savings Plan (RESP), if the gift or payment is so applied promptly [Reg s.43(1)15.1];

    • an "Educational Assistance Payment" received from a RESP or a payment of contributions from a RESP to the subscriber or to the recipient that is or will promptly be applied by the recipient to the cost of tuition, other compulsory fees, books, instructional supplies and equipment or transportation and post-secondary education expenses related to the person's disability, approved by the Director [Reg s.43(1)15.2,15.3].
    (c) Earnings and Training Income (Dependents)

    Earnings and training allowances of dependent adults (see Ch.2 "Claimants") who are in a full-time secondary school attendence, or who are attending a training program, are exempt income [Reg s.38(1)4].

    Training allowances of dependent children (see Ch.2), are exempt income [Reg s.38(1)] (as for that matter are any earnings of dependent children).

    (d) Earnings and Training Income of Post-Secondary Students (Any Benefit Unit Member)

    Commencing 01 April 2009 earnings of a post-secondary education student, or amounts paid to such a student under a training program, are exempt income if ALL of the following conditions are met [Reg 38(7)]:
    • the income is paid during school attendence or earned or paid within 16 weeks preceding attendence (commonly, summer earnings);

    • the program of study is either:

      - approved for student loans eligibility under s.7 of Reg 268/01 under the Ministry of Training, Colleges and Universities Act
      [Note: this does not mean that a student loan has been received by the student for the program, just that the program is one approved by the Ministry generally for student loan eligibility];

      or

      - at an education institution approved under s.8 of Reg 268/01 that prepares the student for application for registration by a regulated profession under Schedule 1 of the Fair Access to Regulated Professions Act, 2006 OR Schedule 1 of the Regulated Health Professionals Act;

      and

    • the course load of the student is at least:

      - where the student is a non-disabled dependent spouse, dependent child or dependent adult in the benefit unit, 60% of a full course load,

      OR,

      - where the student is disabled (ie. a "person with a disability" under s.4 of the ODSP Act, or of equivalent status: See Ch.9: "Person With a Disability"), 40% of a full course load.
    Note that, unlike the related asset exemption [see Ch.8, s.3(s)], there is no requirement that the income be USED for the education purpose.


    11. Common Income Situations

    (a) Motor Vehicle Accident (MVA) Settlements and Awards
    IMPORTANT NOTE:

    Situations involving MVA settlements or court awards are complex and demand the attention of a competent lawyer. Recipients attempting to manage such cases as these on their own do so at great risk.
    . Overview

    One of the most common situations of complex income chargeability is that of motor vehicle accident (MVA) awards and settlements.

    The problems arise due to the multi-faceted nature of most MVA settlements or awards. Different types of 'damages' receive different treatments as exempt assets (see Ch.8 "Asset Rules") and as exempt income [see s.8(c) above]. Primarily, damages for pain and suffering, special damages (expenses) and FLA damages for loss of guidance, care and companionship are exempt income up to a maximum of $100,000 (when totalled with similar WCB and WSIB payments for "non-economic loss").

    MVA court awards usually contain elements of wage replacement, special damages(expenses), pain and suffering compensation - as well as "dependent claims" under the Family Law Act (FLA) for loss of guidance and care-giving efforts. As well, "pecuniary loss" (ie. earnings loss) is now dealt with under the Statutory Accident Benefits Schedule (SABS) system - which is usually handled outside of the court system. Also, lawyers and insurance companies often negotiate (or courts order) "structured settlements" which provide for blended periodic payments which blur the line between "income" and "assets" for ODSP chargeability purposes.

    In "lump sum" settlements the problem can get even more unwieldy as - while they notionally include all of these types of compensation - they do not differentiate the dollar amounts for each type.

    Interest on lump sum retroactive MVA entitlements is discussed in (d) below.

    The ODSP "Policy Directive" on this issue sets out ODSP's approach to these situations in considerable detail:

    Policy Directive 4.6: Compensation Awards

    . Case Law

    The case of Re Gates and COMSOC 19 OR (3d) 158 (Div Ct); [1998] OJ #5050 (QL)(Ont CA) considered whether weekly no-fault auto insurance SABS (Statutory Accident Benefits Schedule) benefits for an unemployed person were exempt as damages for pain and suffering. The Divisional Court, approved by the Court of Appeal, held that such payments where in the nature of loss of normal activities of life and therefore akin to wage replacement, which was not exempt. The case necessarily endorses the proposition that true wage replacement SABS are also not exempt from income chargeability.

    In London (City) v Gibbons 69 OR (2d) 389 (Dist Ct, 1989) the court refused to allow an action by the Director against the recipient based on an "Agreement to Reimburse and Assignment" (see Ch.8 "Applications and Procedures") after a lump sum MVA settlement. The law of the time conditioned the Director's right to be reimbursed on the receipt of monies for "maintenance". The court (to me unconvincingly) distinguished the nature of the settlement as being one of "compensation" in the sense of a capital sum rather than "maintenance" which it equated with an income stream. On this reasoning the court refused to honour the Agreement to Reimburse and Assignment. It is worth noting regarding Gibbons that the present wording of the Regulation [s.15] (which was changed in response to Gibbons which governs Agreements to Reimburse and Assignments now directly maps the concept of 'chargeable income': "(i)f money ... that, if received, would be or would have been included as income for the purpose of calculating the income assistance payable...". That said, the Gibbons case may be pointed to as general authority for the principle that most MVA court settlement (as opposed to SABS amounts) are compensation for loss rather than "maintenance". While the term "maintenance" is no longer used for purpose of reimbursement in Ontario social assistance law it is nonetheless the essential nature of ODSP income support. The case may find life yet again in some future fact situation.

    A thorough and reasonable review how to treat the various elements of an MVA award and miscellaneous litigation amounts as regard to exemption as income was undertaken in the case of Re Gratton and London (City) 18 OR (3d) 354 (OCJGD, 1994) (appeal to Div Ct dismissed). In Gratton the total settlement was itemized as $35,700 of which $26,000 was general damages, some $4,300 was awarded for legal costs and $5,400 for disbursements. The plaintiff paid his solicitor roughly $8,600 towards his actual bill. In applying the (then) $25,000 income and asset exemption the court started from the principle that it was the "net" recovery that was to be considered for these purposes. Thus it immediately reduced the award by the amount of actual legal costs and disbursements down to $21,7000. As this remaining amount was all notionally for general (ie. pain and suffering) damages no portion of the settlement was recoverable by the Director, it all being exempt under the $25,000 rule, discussed above.

    An enterprising plaintiff in Lesperance v Stoney Creek Dairy Ltd [1994] OJ #373 (QL) (OCJGD) tried to recover from the negligent driver the "lost" FBA (Family Benefits Act) allowance that they would 'otherwise' have been entitled to had they not been disentitled by reason of an MVA "general damages" (ie. pain and suffering") payment in the amount of $98,000 (well over the $25,000 exemption). The plaintiff argued that they would have to use their 'pain and suffering' damages for personal support (ie. food and rent) and this would be unfair. The court dismissed the claim on formalistic "causation" reasoning (ie. the MV accident didn't "cause" the loss - the payment did, and the payment was not negligent) - rather than to address the fundamental double-compensation policy issues underpinning the case.

    . Handling Undifferentiated Settlements

    Not all MVA settlements (as opposed to court awards) lend themselves to itemization as in Gratton above, as the solicitors at that point do not always have the foresight to break-down the lump sum for collateral benefit purposes such as arise in the ODSP situation. In those cases ODSP typically approaches the recipient to seek from their lawyer a letter 'estimating' the allocations. If this allocation is reasonable then the Director tends to accept it.

    Those anticipating such settlements would be well-advised to make their counsel aware of the issues discussed in this section and to ensure that a reasonable allocation is recorded somewhere - preferrably in the settlement documents themselves.

    (b) Child and Spousal Support

    . Overview

    Child and spousal support are - almost without exception - deductible dollar-for-dollar from ODSP income support.

    The normal manner in which support payments occur is as a direct payment to the recipient, with a deduction from the income support cheque showing on the cheque statement. An enterprising family court judge whose decision was reviewed in Giles v Villeneuve [1998] OJ #4492 (QL) (OCJGD) attempted by court order to override the deductibility of a support payment, but was corrected by the General Division, which noted that the deductibility was a matter of statute law.

    . Child Support

    An early case on this issue was Director (ODSP) v Favrod [2006] OJ #653 (QL) where a disabled ODSP adult recipient lived with her mother who was not receiving social assistance. The separated father made payments to the mother originally styled as "child support", which the Director wanted to deduct. However the Tribunal held - later supported by the court - that the "support" was in fact income to the mother (who was not in the benefit unit) to assist her as a care-giver with the extraordinary duties which she faced, not income to the recipient - thus avoiding deduction of the income from the recipient's income support.

    Then in 2011 the Court of Appeal decided the case of Ontario (Disability Support Program) v. Ansell (Ont CA, 2011), which expanded and articulated the Favrod principle extensively. In this case Laskin JA (speaking for the court) considered whether child support payments made to the co-resident mother of a 21 year old recipient (an independent adult in her own one-person benefit unit) by her father counted as chargeable income for purposes of ODSP financial eligibility. The key phrasing from the definition of income under consideration was “paid to or on behalf of or for the benefit of every member of the benefit unit" [ODSP Reg 37(1)]. As in Favrod the court accepted as a fact that the therapeutic needs of the recipient required significant and ongoing commitment by the mother in terms of support, attendences and expense.

    In holding that child support payments made to a person outside of the benefit unit were not automatically to be counted as income to the 'child' (read 'offspring') recipient, the court applied a range of reasoning, including the following (except as noted, these principles are also applicable to welfare cases):
    • that the 'purposes' of the ODSP program [Act, s.1(b)] made support of the recipient a shared duty between government, the community, family and the individual themselves, so that deducting the contribution of family against that of government defeated this purpose [SS Note: this is not applicable in welfare cases because the statutory 'purposes' do not include any contribution by family];

    • the right of the 21-year old recipient to co-reside with the mother but still receive ODSP as a one-person benefit unit reflected a legislative intent to separate her income from that of her mother for eligibility purpose;

    • the recipient had no legal standing to enforce the child support order;

    • that the support order did not specify how the money was to be spent;

    • that the recipient had no right of accounting from the mother as to how the money was spent;

    • that the recipient had no control over how the money was spent [this is akin to the Henson principal applied to assets: see the ODSP Guide at Ch.7; OW Ch.7];

    • that the money was taxed in the mother's hands;

    • that the child support ends with the mother's death.
    Lastly, the Court of Appeal also held that automatic deduction ('charging') of child support paid to the single parent of the recipient was discriminatory under the Human Rights Code's protected category of 'family status'. This is because monies spent by a co-resident parental couple that had an incidental benefit to the recipient (still a one-person benefit unit), such as home improvements, would not be deducted from the recipient while those paid in the form of child support to a single parent would, under the Director's argument, be deductible [paras 46-47]:
    [46] A separated custodial parent of a disabled adult attending school usually depends in part on the payment of child support to financially maintain the household. If the Director’s position is upheld, however, even though the custodial parent uses the child support to repair the same roof, buy the same new computer or replace the same television set, those expenses would in effect become the disabled adult’s income under s. 37(1) of the Regulation and reduce or eliminate entirely her income support.
    (c) Business Income Treatment

    . Overview

    There is a distinction in law between "employment" and "business" income. There are various terms used to describe this distinction: 'employment' versus 'self-employment', contracts "of service" versus contracts "for service". There is a general legal test to distinguish them which examines the degree of control exercised over how the work is performed, who bears the risk of loss, who bears the chance of profit and ownership of tools. It is beyond the scope of this program to otherwise explore this distinction.

    The discussion in s.3 "Earnings Income Treatment" (above) notes that - generally - "net income" from a business is treated the same as employment earnings (ie. wages) for purposes of applying income exemptions and determining 'chargeable' income. It also however noted some inconsistencies in this treatment [s.3(b): "Source Deductions"].

    Monthly reporting by the recipient is integral to the determination of net income. Further, the Director reserves the right to approve (and thus disapprove) any particular business venture under the duty of the benefit unit to realize all available resources. Their reasoning is that if a member (who is medically-capable of working) is pursuing a 'lost cause' business then they are not satisfying this duty (see Ch.11 "Workfare").

    Once the "net" business income is determined then the further reductions for earnings incentives, child-care expenses, and disability-related expenses are applied - in the same manner as if the income were from employment (see s.3 above).

    The treatment of a self-employed person's income tax and CPP liability is less clear, and is discussed below.

    . Allowable Business Expenses

    As to what expenses may be deducted frmo gross business income the legislation provides little assistance. ODSP law only vaguely characterizes business earnings as the [Reg s.38(1)1]:
    ... net monthly income as determined by the Director from an interest in or operation of a business ...
    This phrasing is key to the issue and has survived from the previous General Welfare Assistance Act into the present OW and ODSP legislation. The plain meaning to be given to this passage is that business income to be considered for chargeability IS reduced by business expenses (ie. "net") - BUT that the specific allowable business expense deductions are left to the 'discretion' of the Director. Like any legally-assigned 'discretion', the Director must exercise it reasonably. Any exercise of the discretion which results in an arbitrary and complete denial of business expense deductions would be illegal. As such, the disallowing of business expenses by the Director is broadly open to reasoned argument before the Social Benefits Tribunal.

    On this issue Policy Directive 5.4 Treatment of Self-Employment Income can be viewed as the Director's expression of this discretion.

    Note that this policy (as an exercise of the Director's discretion) grants a flat $100 per month expense deduction - without the need for substantiating receipts.

    However the 'rules' set out in the Policy Directive are not always so generous. The treatment of a business owner's personal liability for income tax, CPP and EI contributions, plainly deductible from chargeable earnings income in the employment context - is quite ambiguous in the business situation (neither is it clearly addressed in Policy Directive 5.4). This silence may be intentional as the express deductibility of these items set out in the regulation [s.38(1)1] appears to apply only to monthly deductions from "from wages, salaries, casual earnings or amounts paid under a training program" - all of which are employment situations.

    In my opinion however there is no valid legal reason to exclude similar Income Tax, CPP and EI premium deductibility from business income in the determination of "net income". The above-cited provision [Reg s.38(1)1] can be read consistently with such an interpretation if it is understood as applying specifically to the more common employment context where monthly "source deductions" are so much the rule. The more general phrase "net monthly income ... from an interest in or operation of a business" is quite able to capture within it the deductibility of these other federal obligations.

    Further, there is no valid policy reason to allow them in the employment context but exclude them in the business context. While these items might not be deducted for income tax purposes that is only to ensure that the business owner pays tax on their true "profit". The policy purposes of social assistance are to provide a recipient's benefit unit with enough money to live.

    Further, the Director's logistical difficulties of 'pre-estimating' next year's tax liability on a monthly basis - for purposes of deduction - are not sufficient reason to treat employees and businesses unequally in this regard.

    . Case Law

    The following cases have been largely superceded by the express statutory provisions referred to above: "net monthly income [Reg s.38(1)1], but are still useful for the manner in which they treat the issue generally.

    In Lemay v Ottawa-Carleton [1997] OJ #3816 (QL)(Div Ct) the court considered this same key (above-quoted) phrase and issue in the context of the old General Welfare Assistance Act. The court reviewed the other income deductions allowed in the legislation such as the work incentive deductions (then called "STEP") and held that the correct starting figure for business income was the GROSS amount - before expense deductions.

    Later however in Moon v Director (ODSP) [2002] OJ #2045 (QL)(Div Ct) the court was faced with a similar issue as to whether earnings from newspaper delivery constituted employment or business income (although it assumed that treatment as a business WOULD permit business expense deductions). While the case involved an ODSP recipient the key statutory wording was the same as discussed above. The court criticized the Tribunal for examining this issue from an employment law perspective and using an employment law questionnaire set out in their policies, stating:
    This legislation is social benefit legislation which should be interpreted broadly with its purposes in mind. As a general proposition, we accept the appellant's submission that it is desirable to encourage persons who receive the benefits provided by this legislation to supplement their benefit income by earning what they can. Where such a person is able to engage in some gainful activity and operates a modest business by entering into a contract for services, the legislation should be applied in such a way as to encourage him or her. Expenses incurred in operating such a modest business should be deducted in calculating entitlement to benefits.
    Oddly, the Moon case - while based on essentially the same wording considered in LeMay did not consider, but simply assumed that if the recipient was categorized as engaged in a business then he would be entitled to have his earnings reduced by business expenses. In so doing the court implicitly adopted the 'plain meaning' of Reg s.49(1)1 which I outlined above. There is no reference in the Moon case to the earlier LeMay case. It appears that LeMay is an anomaly.
    Case Note:
    In the ODSP case of Jennings v. Minister of Social Services of Ontario (Div Ct, 2015) the court held (as it rarely does) that the SBT's misapprehension of evidence was so substantial that it constituted a 'question of law' (thus triggering the court's appeal jurisdiction). The legal error was twofold in that the Tribunal considered real estate assets and income of a partnership (in which the appellant had an interest) to be his personal financial resources which were chargeable against him for ODSP purposes, and also that it failed to consider financial disclosure provided by the appellant to Ontario Works during the unified intake process (the applicant's initial financial information was taken by OW) as being effective disclosure to ODSP:
    The Tribunal found that Mr Jennings’ position that “there was no need for him to inform the Director separately when he had already informed Ontario Works borders on the ridiculous.”[61] It was not ridiculous. It was correct, at least until the time at which there was a change of circumstances, upon sale of the property in July 2011.
    The court also held that it was only on the sale of the partnership interest (and the receipt of sale proceeds) by the appellant that such funds could be chargeable against him, since prior to that time the partnership interest was not available to him as a liquid asset. The court cited Reg 28(1)17 as exempting (from asset chargeability) real estate interests as long as "the person with the interest in the real property is making reasonable efforts to sell his or her interest."

    The court took the unusual step of ordering that re-assessment of the appellant's eligibility in light of it's findings be conducted by an ODSP worker who had no earlier involvement with the file, and that - should a new SBT appeal arise from the circumstances - that it not be put before the same member who issued the Order under appeal.
    (d) Interest on Retroactive Lump Sum Payments

    . Overview

    Situations where a recipient receives a retroactive lump sum payment - such as an MVA settlement or STD/LTD back-payments - often involve the payment of accrued interest on the delated payment (retroactive government entitlements usually do NOT include interest).

    The issue can arise in such situations as to whether the interest should be treated in the same way as the principal amount for income and asset purposes (as different types of monies are treated quite differently), or whether it is 'general' - and chargeable - income. While in my experience it is usual for any interest amounts to be allocated proportionally with the elements of the principal payment, and thus subject to the same income and asset treatment, the issue did arise directly in the case of Mule v Director, ODSP - considered below. The case is essential reading for
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