Adjudicator Accepts Revised Tax Return

In the License Appeal Tribunal (LAT) decision N.F. and Aviva Insurance Canada (18-007077/AABS), the adjudicator was faced with the decision of accepting an amended tax return that would increase the quantum of an applicant’s income replacement benefits (IRBs).

The applicant was injured in a motor vehicle accident on December 18, 2016 and had made a claim for IRBs.  The applicant was employed as a restaurant manager prior to the accident.

Following the in-person hearing during 2019, the applicant noted that their 2016 tax return reported earnings of $3,000.  The applicant immediately had their 2016 tax return amended to report income of $37,440.  Canada Revenue Agency (“CRA”) accepted and re-assessed the applicant’s 2016 income based on the revised amounts reported.  The applicant also had year-to-date earnings on their pay statements that were approximate to the amounts reported on their revised 2016 tax return.

The respondent disputed the inclusion of the amended tax return prepared by the claimant.  Specifically, the respondent highlighted the fact that the applicant’s 2016 T4 Statement of Remuneration reported income of $9,000, as opposed to the $37,440 as noted on the applicant’s pay statements.  The respondent suggested the discrepancies created credibility issues for the applicant, and that their updated records should not be considered an accurate representation of their income.

The adjudicator rejected the respondent’s argument. Instead, the adjudicator stated the focus should be on the amount accepted by the CRA, which was in accordance with Section 4(5) of the SABS.   The adjudicator determined that since CRA performed a re-assessment of the applicant’s 2016 income, that this updated amount should be relied on by the Tribunal.  Given that the amount was accepted by the Tribunal, the applicant was ultimately awarded IRBs.

The Canadian taxation system is based on the self-assessment principle, which means an individual is required to complete a tax return each year to report any income/(loss) with CRA.  CRA will accept amounts reported by a taxpayer whether they are accurate or not.  Until CRA investigates a tax return closer, any errors may not be noted for a long period of time, if at all.  For self-employed individuals, no T4 slips exist (i.e. T4s filed by arm’s length employers) to verify the level of income reported, hence the self-assessment principle.

Read the decision in full detail here:

N.F. vs. Aviva Insurance Canada, 2020 ONLAT 18-007077/AABS