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ARTICLE · 01 APRIL 1999

Revenue Canada Clarifies Budget Proposal on Retroactive Lump-Sum Payments

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CanadaAccounting and Audit

Revenue Canada Clarifies Budget Proposal on Treatment of Retroactive Lump-Sum Payments.

For individuals resident in Canada, income from many sources is taxable in the year in which it is received. This generally applies to employment and pension income, arbitration awards, and to spousal and taxable child support payments. As a result, individuals are generally taxable on retroactive lump-sum payments in the year they are received, even though a significant portion may relate to prior years.

A Canadian individual's tax liability on retroactive lump-sum payments may be higher than it would have been if payments had been made, and taxes, year-by-year as the income arose. This is due to the progressivity of the Canadian individual income tax system.

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