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7. Exempt Government Income
(a) Payments from Ontario
The following is a list of payments from Ontario that are exempt income [Reg s.52]:
(b) Payments from Canada
- Welfare (Ontario Works) assistance.
This includes basic financial assistance (shelter, basic needs and benefits). It can also include any direct employment assistance funding, such as Learning, Earning and Parenting Incentives (LEAP). LEAP can provide a $500 payment which can be used only for education or an investment towards education (eg. RESP).
Practically this exemption is only applicable when a recipient receives retroactive welfare assistance.
- Ontario Disability Support Program payments for children with severe disabilities.
This is a special program under ODSP [see the Isthatlegal.ca ODSP Legal Guide: Ch.5]. Payments for children with severe disabilities are exempt, but regular ODSP income support and other benefits are considered chargeable income.
During a transition from welfare to ODSP eligibility a recipient may receive both welfare and ODSP for the same period of time (or more commonly, retroactive ODSP after a successful appeal). In such a case ODSP will deduct the welfare received during the period of ODSP eligibility (and any outstanding overpayment) and re-pay it to welfare directly. The (new) ODSP recipient will usually then get the balance in the form of a retroactive income support cheque.
- Payments from a Children's Aid Society (CAS), any other approved agency, or the Minister to foster parents for the direct care of the foster children, including CAS payments made on behalf of children receiving CAS services but not in care and to persons with ordered custody of children.
- A payment received under the 'Services and Supports to Promote the Social Inclusion of Persons with Developmental Disabilities Act, 2008', if the payment is used or will be used within a reasonable time period to purchase the services and supports for which the payment was intended.
- Any payment received under the Ministry of Community and Social Services Act.
The Ministry runs a variety of programs. Of these, families on welfare may avail themselves of the Ontario Child Care Supplement for Working Families (OCCSWF). Such payments are exempt as income, and as well (since 27 March 2009) no longer count as child care 'reimbursement' to reduce child care expenses otherwise claimable under earnings exemptions treatment [see s.3(d) above].
- Ontario Tax Credits payments or refunds.
These may be received by a recipient directly as part of an Income Tax refund, or indirectly as a credit within the income tax calculation. In either event they are exempt as income.
- Taxation Act Payments
Payments or refunds under the following provisions of Ontario's Taxation Act, 2007 are exempt as income:
- s.99 (non-senior property and sales tax credit)
- s.100 (seniors property and sales tax credit)
- s.101.1 (non-senior property tax credit)
- s.101.2 (senior property tax credit)
- s.104.11 (Sales Tax Credit)
- s.104.12 (Ontario Sales Tax Transition Benefit)
- Ontario Seniors Homeowners' Property Tax Grants [this exemption is in effect 01 January 2009].
- Permanent partial disability supplements under the (old) Workers' Compensation Act.
- WCB or WSIB awards for non-economic loss ("NEL" awards).
Note that these awards, along with civil and Family Law Act pain and suffering damage and expense awards are subject to a aggregate $25,000 "cap" for income exemption purposes. (see "Other Exemptions: Pain and Suffering Awards", below)
It is sometimes possible to convert or "cash-in" regular monthly WSIB/WCB "FEL" ("future economic loss") payments (for loss of income) into a lump sum (called "commutation"). However - without prior arrangements with the administrator to treat such a 'cash-out' as exempt income and/or assets, such an action may be treated by the administrator either as a breach of the "duty to realize available resources" or of the "duty not to improvidentally dispose of assets" [see Ch.7, s.7 and 8]. If so, they will result in a disentitling income charge when received and large ongoing (and also disentitling) asset charge thereafter. While it is tempting to commute such income streams to avoid their on-going deduction from assistance, it almost always results in long-term disentitlement. Contact your worker beforehand in all such situations.
- Ontario Child Benefit Payments received under s.8.6.2 of the Income Tax Act (Ontario) [see s.6(d) above].
- Payments made under the Ontario Child Benefit Equivalent Act, 2009. This is an Ontario program to match the federal Children's Special Allowances Act (Canada), with money equivalent to Ontario's Ontario Child Benefit (OCB), for children in the care of certain agencies [Reg 52(1)14].
- Payments made under the "Quest for Gold - Ontario Athletes Assistance Program" [Reg s.54(1)22].
- Payments made by a service manager designated under the Housing Services Act, 2011 to be used as a rent supplement or a housing allowance, where approved by the Director.
A rent supplement funded by the Ministry of Health and Long-Term Care that is used to pay for permanent supportive rental housing for persons who are homeless or at risk of becoming homeless [Reg 54(1)15.2].
However the exemption amount for the above two forms of income shall not exceed the amount by which actual allowable shelter costs exceed the welfare shelter allowance. The amount of the shelter allowance varies with the size of the benefit unit, and with periodic changes in the shelter allowance (typically there are small annual increases). Basically this rule means that any 'extra' received through such a payment is not exempt income ('extra' being determined by what welfare will count as a shelter expense). For specific amounts and details to make this calculation see Ch.3, s.2(c) ["Income Rules: Renters and Home Owners: Shelter"][Reg s.52(1)15,(2)].
- Payments made under the Ministry of Municipal Affairs and Housing’s Ontario Renovates program [Reg 52(1)15.1].
- Payments under the Ontario Trillium Benefit program received under section 103.3 of the Taxation Act, 2007 [Reg 52(1)18].
- Payments made under the Community Homelessness Prevention Initiative up to the monthly personal needs allowance granted to residents of long-term care homes [see Ch.3, s.9(b)] ($140 at 2015) [Reg 54(1)24, 43(1)] if:
- the payment is made by a service manager designated under the Housing Services Act, 2011;
- the payment is made to residents of a place that provides permanent housing with limited supports to vulnerable adults who require some supervision and support with the activities of daily living, and
- the payment is made for the personal needs of the resident.
- Payments made under the Community Homelessness Prevention Initiative by a service manager designated under the Housing Services Act, 2011 and applied to [Reg 54(1)25]:
- rent deposits, including first and last month’s rent;
- establishing a new principal residence,
- maintaining the health or welfare of a member of a benefit unit in his or her current residence,
- arrears on any shelter expense [as defined in Ch.3, s,2(c), or Reg 42(1)], or
- other services, items, payments or costs related to housing and homelessness, as approved by the Director.
- Youth Jobs Strategy payments, made by either or both of the Ministry of Economic Development, Trade and Employment and/or the Ministry of Training, Colleges and Universities, if, in the opinion of the administrator, the payment will be used within a reasonable period and for the purpose for which it was paid [Reg 54(1)27].
- Grants received under the Northern Health Travel Grant Program, administered by the Ministry of Health and Long-Term Care, to the extent that the grant amount exceeds the amount otherwise provided by welfare for medical transportation for the same trip [see Ch.4, s.2(b) "Medical Transportation")] [Reg 54(1)28].
The following is a list of federal and extra-provincial payments that are exempt income [Reg s.53, 54(1)19]:
Note 1: Any federal exempt loans are listed in s.9(b) "Non-chargeable Loan Income", below.
- GST rebates [s.122.5 of the Income Tax Act (Canada)].
- By policy (see Policy Directive 5.1), income tax refunds are considered exempt income.
Except for Ontario tax credits (which are exempt as such, above), refunds are usually a refunding of monies 'overpaid' by the taxpayer/recipient. As such they have normally already been assessed for welfare income impact, or were originally received before the time when the recipient was on welfare.
- A death benefit payment under the Canada Pension Plan, or the Quebec Pension Plan.
- A payment received from the Department of Indian Affairs and Northern Development (Canada) or from a band for board and lodging of a student attending a secondary school not on the reserve. These payments are made under the federal "Boarding Home Policy" to the adult who runs a boarding home in another community where the native child must live to attend school.
- A payment received pursuant to the Indian Act (Canada) under a treaty between Her Majesty and a band, other than funds for post-secondary education.
- A payment made by a band as an incentive bonus for school attendance to any dependant who is attending school.
- A payment from a municipality or a Tribal Council, on behalf of the Department of Indian Affairs and Northern Development (Canada), received between October 2005 and September 2006 by an evacuee from that part of the Fort Albany No. 67 Reserve on which members of the Kashechewan First Nation reside.
- By policy, payments made under the Skills Development Employment Benefit under the Employment Insurance Act are exempt income.
- By policy, payments made under the Oppourtunities Fund for Persons with Disabilities (Employment and Social Development Canada) are exempt income.
- Payments made on surrender or partial surrender (designation) of title rights in a reserve to the federal government under s.40 of the Indian Act (Canada) are exempt.
- A payment received under the Extraordinary Assistance Plan (Canada).
This is a federal program to financially assist HIV-infected individuals. See the Health Canada website for details.
- A benefit received under the Universal Child Care Benefit Act (Canada).
This program commenced July 2006 and provides $100 to families for each child under the age of 6. It will automatically be sent to families already receiving the CCTB (see s.6 above). While labelled a "child care" benefit there are no restrictions as to how the money may be used, an issue that was politically contentious as the funding was largely taken from that previously designated for organized child care facilities.
- A payment by Canada into a Registered Disability Savings Plan (RDSP).
This program started in 2008, and acts as a tax-deferral mechanism similar to RRSPs [Reg s.53(17)].
As is explained is s.8(l) below, third parties gifts towards RDSPs and rolled-over RDSP interest are also exempt income. As well, any cash-out of an RDSP by a recipient is exempt income.
This is a useful Canada Revenue Agency fact sheet on the topic:
Registered Disability Savings Plans
- A payment made as a tax credit under the Working Income Tax Benefit under s.122.7 and 122.71 of the Income Tax Act (Canada).
- Payments made under the Athlete Assistance Program, administered by the Department of Canadian Heritage [Reg 54(1)30].
Note 2: Any federal student-related "income" is discussed in s.10 "Student and Education-Related Income", below.
Note 3: Treatment of the Canada Child Tax Benefit (CCTB) is dealt with separately above in section 6.
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 on social assistance 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.50(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 there is a rule (easily excepted) that children in such cases are not able to collect any amount for shelter component in their assistance (see Ch.3 "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 Pension Benefits Act (Ontario). 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.7, s.7: "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) Pain and Suffering Awards
To a maximum of $25,000 total of any or all of the following [Reg s.54(2)]:
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].
- damages or compensation for pain and suffering from injury or death to a member of the benefit unit (also known as "general damages"),
- actual and future expenses related to such injury or death [Reg s.54(1)4] (also known as "special damages" and "disbursements");
- "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.54(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.52(8.1)].
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 $25,000 income exemption [Reg 54(4)]. 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:
The issue of when interest on such lump sum awards is chargeable is discussed in s.11(d), below.
- s.13(1-3,7,8) of Reg 672/90 (accidents before 01 Jan 1994);
- s.19 of Reg 776/93 (accidents after 31 Dec 1993 but before 01 Nov 1996);
- s.12 of Reg 403/96 (accidents on or after 01 Nov 1996);
- s.12 of Reg 34/10 (effective 01 Sept 2010).
(d) Special Agreements
Payments from the following agreements are exempt from treatment as income [Reg.53(15),54(1)paras.5,10,12,13,17,18]:
(e) Administrator-Approved Expenditures from Asset-Sale Funds
- 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.
- Huronia Regional Centre class action settlement payments [Reg 54(1)13.1];
- Rideau Regional Centre class action settlement payments [Reg 54(1)13.2];
- Southwestern Regional Centre class action settlement payments [Reg 54(1)13.3];
- 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 credit" within the meaning of section 5.07 of the Indian Residential Schools Settlement Agreement.
Income received from the sale or disposition of an asset that has been put towards, or - if the administrator approves - will be put towards [Reg s.54(1) para.6]:
(f) Charitable Donations
- purchase of a principal residence by a member of, and for the use of, the benefit unit;
- assets which are, in the opinion of welfare, 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.7: "Asset Rules" and Reg s.39); or
- the purchase of an asset that does not put the recipient over the asset cap (see Ch.7 "Asset Rules").
Donations received from a religious, charitable or benevolent organization are exempt from treatment as income [Policy Directive 5.1] [Reg s.54(1)7].
(g) $6,000 Gift or Voluntary Payments Exemption
As of 01 September 2013, welfare recipients benefit from an exemption of $6,000 per year (that's a 'running year', not a calendar year) for "(g)ifts or other voluntary payments" [Reg 54(1)8].
Until that date, this exemption was only available to ODSP recipients, where it's most common use was to regulate trust payments made to recipients.
(h) Long-Term Care Home Special Services
Payments by a friend or relative for special services provided by a long-term care home to a resident/recipient [Reg s.54(1)9] are exempt income.
(i) 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.
(j) 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.
(k) Insurance Pay-outs
Pay-outs by insurance companies for "loss of or damage to real or personal property" - if the money is applied to - or with administrator approval will be applied to any of the following:
(l) Registered Disability Savings Plan (RDSPs) Income
- purchase or repair of s.39 exempt assets (see Ch.7 "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 administrator;
- the purchase or repair of an asset whose ownership by members of the benefit unit does not put the benefit unit over the asset cap (see Ch.7 "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.
In 2008, the Income Tax Act created RDSPs, which operate as a tax deferral mechanism similar to RRSPs.
Payments to a total maximum of $200,000, made to a recipient by third parties which are intended for RDSPs, and which are applied to RDSPs within a reasonable time, are exempt from chargeability as income [Reg s.54(1)11.4, 54(3); Income Tax Act s.146.4(4)(g)(iii)]. This is also the case with interest in an RDSP which is rolled-over back into it [Reg s.54(1)(11.5)].
Most significantly, withdrawals by a recipient from an RDSP are also exempt income (though they are taxable) [Reg s.54(1)11.6].
This is a useful Canada Revenue Agency fact sheet on the topic:
Registered Disability Savings Plans
(m) Court-Ordered Payments Applied to Approved Uses
Administrator-approved payments, not otherwise subject to reimbursement, made pursuant to a court order for the following specific purposes - and which are applied to such purposes - are exempt as income [Reg 54(1)20]:
(n) Energy Efficiency Grant, Items or Services
- expenses for disability-related items or services for a member of the benefit unit;
- education or training expenses incurred with respect to a member of the benefit unit because of their disability.
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, municipalities, an Independent Electricity System Operator, the Ontario Energy Board, Ontario or Canada for the purposes of energy efficiency, conservation or affordability, is exempt as income [Reg 54(1)21].
(o) Transplant Patient Expense Reimbursement Program Payments
Payments made to any member of the benefit unit under the Transplant Patient Expense Reimbursement Program (under the Ministry of Health and Long-term Care) are exempt as chargeable income, if they are or will be applied as intended under that program within a reasonable time [Reg 54(1)23].
(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 [Reg 54(1)29].
9. "Loans" as Income
(a) The Legal Status 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, s.48(1) of the OW General Regulation states:
48(1)Thus income is "payments", plus the monetary value of non-cash items and services provided. The status of loans is not expressly (though it certainly is implicitly, see below) addressed within the current regulation definition of "income".
... 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 ...
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 the slightly stronger legal argument is that "loans" are income, though it is arguable.
(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 (GWA) - 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:
GWA s.13(1)It also included a further passage:
.... the income of an applicant or recipient shall include all payments of any nature or kind whatsoever ...
GWA s.13(2)This second passage regarding mortgage, loan and similar payments is not repeated in the present Ontario Works 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".
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;
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 was also 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 recently by the Supreme Court of Canada in the case of Rizzo v Rizzo Shoes  1 SCR 27.
This conclusion is further support for the position that even when "loans" are expressly mentioned, their meaning is going to be read-down to that least-impacting the recipient.
(iii) 1993 Post-Rubino Amendments
The story continues. Shortly after Rubino in December 1993 the provincial cabinet amended the (then General Welfare Assistance Act) regulation to expressly include loan amounts as income so that it read:
GWA s.15(2)The case of R v Adeti-Bastine  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 and student loans. While the defendant raised Rubino in his defense, the court dismissed this argument for several reasons.
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 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) was "chargeable income". Thirdly, the defendant 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 it's social assistance legislation in 1997 (under the composite Social Assistance Review Act, or "SARA"), creating the Ontario Works Act and new regulations under it. The new law removed the express inclusion of loans within the definition of "income". This has greatly confused matters, for 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.48(1) of the Regulation.
That said, the new OW general regulation does integrate some of the intent and language of the 1993 amendment quoted above, though it has been re-located to the 'exclusions' portion of the regulation, which reads in the relevant part:
Reg s.54(1)This extensive 'exempting' of some loan proceeds from chargeability opens up the "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.54(1) [quoted above], logically and necessarily implies that all other loan proceeds are chargeable.
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. 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 or transportation 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,
iv. 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 or same-sex partner included in the benefit unit or a sole support student as defined in subsection 1 (1) of Regulation 774 of the Revised Regulations of Ontario, 1990, or
C. a child on whose behalf temporary care assistance is being paid and who is not 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.
v. applied or will be applied to the purchase of a motor vehicle required for employment assistance activities or to maintain employment, or
vi. applied or will be applied to the payment of first and last month's rent necessary to secure accommodation for the benefit unit.
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 was being considered.
The principle was however applied by the court in R v Adeti-Bastine (above), 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 the Supreme Court of Canada in Rizzo v Rizzo Shoes (SCC, 1998) (where any ambiguity in the wording of benefits-conferring legislation is resolved in favour of the rights-claimant), is an open issue.
Note: (v) Summary
While not entirely on point, another case does bear mentioning here. In R v Maldonado  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 was dealing 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 welfare fraud case.
In summation, the legal status of loans as chargeable income remains unclear - although in my view the slightly stronger (though arguable) 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 these 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) Exempt Loan Income
On the assumption that loans generally are chargeable income (which is plainly the legal position of welfare administration and the Director of Ontario Works), this sub-section reviews when and how some loan income is exempt from 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.
Some loan exemptions were listed in the quote from s.54 of the Regulation above. They include that portion of a loan, as approved by the administrator:
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.53(1)].
- 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;
- that is applied or will be applied to the purchase of a motor vehicle required for employment assistance activities or to maintain employment;
- that is applied or will be applied to the payment of first and last month's rent necessary to secure accommodation for the benefit unit; and
- applied to the purchase of household items necessary for the well-being of one or more members of the benefit unit.
10. Student and Education-Related Income
Before exploring student and education-related income treatment it is worth noting the blanket welfare ineligibility provisions that applies to some students.
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 Ch.2 "Claimants: Post Secondary Students").
Further, a recipient with student funding eligibility would not be able to avoid this rule by declining to apply for student funding, as they would be forced into applying for it by the 'duty to realize available financial resources' rules (see Ch.7: "Asset Rules").
Claimants with a spouse are not categorically ineligible in the above circumstances, but the effect of their student funding (if any) will have to be assessed under normal chargeability rules, discussed below.
(b) Student and Education-Related Income Treatment
The following student loans, or portions thereof, are exempt income:
In addition, some non-loans are exempt as well:
- provincial and federal government-guaranteed student loans, but only the portions for tuition, compulsory fees, books, instructional materials, transportation and child care [Reg s.54(1)1(iii)];
- all portions of government-guaranteed student loans to:
- part-time students,
- dependent adults (not 'dependent spouses': see Ch.2 "Claimants" for the distinction),
- single parents;
- minors in temporary care who are not sole support (ie. single parents) [Reg s.54(1)1(iv)];
- other administrator-approved grants, awards or 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.54(1)2.1].
(c) Earnings and Training Income (Dependents)
- provincial awards or grants from the Ministry of Training, Colleges and Universities to post-secondary students [Reg s.54(1)2];
- a bursaries granted under the Education Act to a full-time secondary student [Reg s.54(1)3];
- other administrator-approved grants and awards for training or post-secondary education that are or will be applied to the cost of tuition, fees, books, instructional supplies, equipment or transportation for the intended program;
- interest earned from and reinvested into a Registered Education Savings Plan (RESP)[Reg s.54(1)11].
- A "Canada Education Savings Grant". These grants are paid directly into Registered Education Savings Plans (RESPs) [Reg s.53(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.54(1)11.1];
- 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, transportation and post-secondary education expenses related to the person's disability, approved by the administrator [Reg s.54(1)11.2,11.3].
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.49(1)6].
Training allowances of dependent children (see Ch.2), are exempt income [Reg s.49(1)5] (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 May 2009 - and subject to the below-noted exceptions - 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 49(1)10]:
Note that, unlike the related asset exemption [see Ch.7, s.4(t)], there is no requirement that the income be used for the education purpose.
- 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];
- 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;
- the course load is at least 60% of a full course load.
However, this income exception does not apply [Reg 49(1)11,12] for determining initial eligibility or the amount of assistance for the first three months of eligibility unless:
- the applicant previously had at least three month's eligibility as a member of either an OW or ODSP benefit unit,
- that eligibility was cancelled effective on a date within the last six months, and
- when cancelled, the applicant had either earning or training program income.
11. Common Income Situations
(a) Motor Vehicle Accident (MVA) Settlements and Awards
One of the most common situations of 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. MVA court awards usually contain elements of wage replacement, special damages (expenses), pain and suffering compensation - and often 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.
Different types of 'damages' receive different treatments as exempt assets (see Ch.7 "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 $25,000. In lump sum settlements the problem can get even more unwieldy as - while they notionally include all of these types of compensation - they are typically undifferentiated by these 'heads of damage'.
. Case Law
The case of Re Gates and COMSOC 19 OR (3d) 158 (Div Ct);  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 administrator 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 administrator's right to be reimbursed on the recipient's 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 - and which now governs Agreements to Reimburse and Assignments - directly maps the concept of 'chargeable income': ie. "(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 settlements (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 welfare assistance. 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 $35,700 settlement was itemized as $26,000 general damages, $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 $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 $21,700 (increasing the legal fees reduction to reflect the true legal bill). As this remaining amount was all notionally for general (ie. pain and suffering) damages, no portion of the settlement was recoverable by the administrator, it all being exempt under the $25,000 rule, discussed above.
An enterprising plaintiff in Lesperance v Stoney Creek Dairy Ltd  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 typically have the foresight to break-down the lump sum for collateral benefit purposes such as arise in the welfare situation. In those cases welfare typically approaches the recipient's solicitor to get a letter 'estimating' the allocations. If this allocation is reasonable then the administrator 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.
The issue of when interest on a lump sum MVA settlement is 'chargeable' is discussed in (d) below.
(b) Child and Spousal Support
While spousal support paid directly to a recipient is plainly full chargeable against them, the law respecting child support has undergone recent changes, as are discussed below.
The normal manner in which support payments occur is as a direct payment to the recipient, with a deduction from the assistance cheque showing on the cheque statement. An enterprising family court judge whose decision was reviewed in Giles v Villeneuve  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 (Ont Div Ct, 2006) 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):
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]:
- 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.
 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
The question here is: are business expenses deductible from business income for purposes of determining chargeable income? The short answer is: yes.
What are and are not allowable "deductions" are discussed in general terms in the applicable Policy Directive [5.13]. Monthly reporting by the recipient is integral to the determination of net income. Further, the administrator reserves the right to approve (and thus disapprove) any particular business venture under the duty of a recipient to realize all available resources. Their reasoning is that if a recipient is pursuing a 'lost cause' then they are not making themselves available for work search and workfare duties (see Ch.11 "Workfare").
Once the "net" business income is determined then the further reductions for source deductions, earnings incentives, child-care expenses, etc are applied - in the same manner as if the income were from employment (see s.3 above).
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 who owns the tools. It is beyond the scope of this program to otherwise explore this distinction, but readers may wish to refer to the more complete discussion on the topic in Ch.1, s.1 of the Isthatlegal.ca Employment Law (Ontario) Legal Guide.
So, when a recipient is categorized as "self-employed" then the issue arises as to how their earnings are to be assessed for income chargeability: is it going to be gross earnings (before expenses) or "net" earnings (after expenses)? And if deductions are to allowed, which ones? This is reminiscent of the same issue in the income tax context.
Welfare law only vaguely characterizes business earnings as the [Reg s.49(1)]:
... net monthly income as determined by the administrator 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. it is "net" income) - but that the specific allowable business expense deductions are left to the discretion of the administrator. Like any legally-assigned 'discretion', the administrator must exercise it reasonably. Any exercise of the discretion which results in an arbitrary and complete denial of business expense deductions would be illegal.
. Case Law
While the above states the law and policy on this issue, it has had mixed treatment in the courts.
In Lemay v Ottawa-Carleton  OJ #3816 (QL)(Div Ct) the court considered this same key (above-quoted) "business earnings" 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)  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 itself 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: (d) Interest on Retroactive Lump Sum Payments
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.” 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.
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 delayed 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 thus 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 anyone involved in such a conflict.
. Case Note: Mule and Director, ODSP (Div Ct, 2007)
In Mule v Director, ODSP (Div Ct, 2007) the court was faced with the (relatively) straightforward issue of whether:
... prejudgment interest on damages for pain and suffering form(s) part of the "damages or compensation for pain and suffering" received by an injured person?
"Prejudgment interest" (as distinct from "post-judgment interest", which is self-explanatory) is a concept used in civil litigation (lawsuits). It operates to give a successful plaintiff interest on damage awards (which are always made later) for the period between the filing of the lawsuit and the issuance of judgment. Under the Courts of Justice Act, s.128, [and Rules of Civil Procedure R53.10], the rate for pain and suff