CCCC members who operate or are linked to private Christian schools will be interested to know of some recent changes to the Income Tax Act.
Many private schools offer tuition discounts to staff members with children enrolled in their schools. Similarly, some employers offer financial assistance to employees for their children’s education (in the form of bursaries or scholarships, for example). Until now, employer-provided financial assistance in respect of elementary and secondary education has been considered by CRA to be a taxable benefit. However, as a result of recent Income Tax Act amendments, such employment benefits may now be non-taxable.
A new subparagraph (s. 6(1)(a)(vi)) has been added to the Income Tax Act.1 The new provision states that any benefit received or enjoyed by a taxpayer’s family member under a program offered by his/her employer that is designed to assist the family member in furthering his or her education will not be included in the taxpayer’s income as an employment benefit IF:
- It is reasonable to conclude that the benefit is not a substitute for salary, wages, or other remuneration of the employee, AND
- The employer and the employee deal with each other at arm’s length
Ministerial correspondence from the Minister of National Revenue has confirmed that tuition discounts offered by a private elementary or secondary school to its employees’ family members will no longer be considered a taxable benefit to the employee, if it meets the above criteria.2 In addition, on its website, the Canada Revenue Agency has confirmed that the new provision applies to:
[B]enefits received or enjoyed by the family member with respect to the family member’s attendance at an elementary, secondary or post-secondary school (private or otherwise). It will also apply to tuition discounts provided by such educational institutions to the family members of its employees….[If] the benefit is received in connection with the family member’s enrolment in an elementary or secondary school educational program, the entire amount may be exempt from tax pursuant to the scholarship exemption.3
The new provision became law on June 26, 2013, and will apply to benefits received on or after October 31, 2011. For more information, see paragraphs 3.18-3.19 of CRA Income Tax Folio S1-F2-C3: Scholarships, Research Grants and Other Education Assistance
Private schools should review their current policies related to tuition discounts or benefits offered to staff members in light of this new provision, in consultation with their tax advisors.
1 By virtue of s. 170(1) of Bill C-48, Technical Tax Amendments Act, 2012 (Assented to on June 26, 2013).
2 Ministerial Correspondence from the Honourable Gail Shea, Minister of National Revenue, CRA Document No. 2012-0435091M4 (March 7, 2012).
3 CRA Income Tax Folio S1-F2-C3: Scholarships, Research Grants, and Other Education Assistance, para. 3.18, online: < https://www.canada.ca/en/revenue-agency/services/tax/technical-information/income-tax/income-tax-folios-index/series-1-individuals/folio-2-students/income-tax-folio-s1-f2-c3-scholarships-research-grants-other-education-assistance.html?utm_source=tax-techpub&utm_medium=eml& >.