What is this term in the Canadian Income Tax Act called “income”?

As a Canadian taxpayer we are all aware we should be taxed on our “income”. But do we know exactly what income is?
A closer review of the Income Tax Act will tell you that this term is not clearly defined. However, the legislation clearly tells us how to calculate taxable income.

So then why would such a key term such as income not be clearly defined? Did the lawmakers mess up and forget about this? The answer is “no”. It was likely strategically left out. If the term was defined a shrewd lawyer or chartered accountant would undoubtedly find flaws in the definition and exploit it for tax loopholes.

Could the average taxpayer exploit this lack of definition? Unfortunately, no. The Income Tax Act specifies the various types of income that are taxable including the following categories: office, employment, business and property. However, not all is bleak. There are certain types of income that are not taxable. Examples are:
• compensation for entering into a non-compete agreement
• damages for breach of employment contract before the job began
• deceased person’s retroactive pay increase
• lottery winnings
• rental reimbursement from a child to the parent
• strike pay
• scholarships if the recipient is attending post-secondary studies

Clearly defined or not, as a taxpayer the onus is on you to know what income is taxable and what is not.

A. Ko, CGA, CA

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Disclaimer

Information contained within this blog or on this website, either expressly or by reference, does not constitute professional advice and is designed strictly for general information purposes. As individual circumstances vary widely anyone seeking assistance with either their accounting or tax situation are strongly encouraged to seek appropriate professional advice.

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