In June of 2023, the federal government passed amendments to the Income Tax Act, which will attract the attention of employment law counsel. Bill C-47 requires that any transaction which meets the updated version of an "avoidance" transaction must be reported to CRA.
An avoidance transaction is one which has as one of its main objectives a tax benefit. The triggers for such an event are:
- A person receiving a tax benefit from the reportable transaction (or a person entering into the transaction for the benefit of someone receiving a tax benefit), and
- Advisors and promoters who receive certain types of fees in connection with reportable transactions.
It has been suggested by some observers that contingency fees, and/or a confidentiality term and/or contractual protection are signals for such a concern. This is hypothetical, at best, presently.
A settlement payment shown as non-taxable general damages, with an indemnity may need to be reported. Typically the indemnity is one given by the employee to the effect that should any taxes be determined as due and payable, such are the employee's responsibility.
Should the settlement be fair and reasonable and supported by the accepted range of prior awards and a reasonable factual basis, there could be no suggestion of an avoidance transaction.
At the present time, there are no designated "notifiable transactions" which have been delineated. There were in the past a list of transactions expected to be notifiable none of which relate to employment law issues.