# 2014-173 - Canadian Forces Severance Pay (CFSP), Deduction of Income Tax at Source

Canadian Forces Severance Pay (CFSP), Deduction of Income Tax at Source

Case Summary

F&R Date: 2014–12–08

The grievor elected to receive Payment in Lieu (PIL) of his Canadian Forces Severance Pay (CFSP) prior to the election deadline, 28 March 2013. Prior to submitting his Election Form, he submitted a Canada Revenue Agency (CRA) Form T1213 to the CRA to request a Letter of Authority to not withhold income tax form his CFSP PIL with the understanding that the full amount would be deposited in a Registered Retirement Savings Plan (RRSP). The grievor provided his Letter of Authority to his unit Orderly Room (OR) who forwarded it to the Wing OR on 5 April 2013, eight days after the election deadline. When the grievor's PIL was posted to his pay account in November 2013, he noted that income tax had been deducted. The grievor contested this act.

The Initial Authority, the Wing Commander, denied the grievance on the basis that the grievor's CFSP PIL file had not and still did not contain a CRA Form T1213 as of 24 July 2014.

The Committee had to determine whether the Canadian Armed Forces (CAF) erred in deducting income tax at source from the grievor's CFSP PIL.

The Committee reviewed Compensation and Benefits Instruction (CBI) 204.40 and confirmed that the grievor was entitled to the CFSP PIL. It then reviewed the issue of taxation.

The Committee noted that the Canadian Forces Severance Pay (CFSP)/Rehabilitation Leave Administration Directive (hereinafter “the Directive”) provided that, for amounts in excess of $10,000, a Canadian Armed Forces (CAF) member must submit a T1213 to the CRA and obtain a Letter of Authority which was to accompany their Election Form. However, the Committee found that the date of 28 March 2013 was only determinative when assessing an entitlement to the PIL and that the Directive was merely an administrative policy.

In the grievor's case, the CAF were in receipt of the Letter of Authority no later than 5 April 2013 and the Committee received confirmation from the Director General Compensation and Benefits that the CAF had the ability to make changes to the taxation up to 12 December 2013.

The Committee found that there was no regulatory or administrative provision that would have precluded the CAF from not withholding income tax from the grievor's PIL.

CDS Decision Summary

CDS Decision Date: 2016–05–03

Case withdrawn at Final Authority level.

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