Income Replacement Indemnities and Net Federal Supplements

The tax treatment of income replacement indemnities and net federal supplements varies between federal and Quebec provincial tax returns. While both types of payments must be reported for income calculation, they may not be taxable in all circumstances, particularly in Quebec.

Income replacement indemnities are payments received for loss of financial support due to various circumstances, such as:

• Workers' compensation from bodies like the Commission des normes, de l'équité, de la santé et de la sécurité du travail (CNESST) in Quebec.
• Indemnities from a traffic accident through the Société de l'assurance automobile du Québec (SAAQ).
• Compensation for a precautionary cessation of work, an act of good citizenship, or being a victim of a crime

Report income replacement indemnities and net federal supplements on Line 148. While most amounts can be deducted on Line 295, they must be included for certain tax credits.

Examples of indemnities (RL-5 / T5007):

• Workers’ compensation (CNESST, Box C)
• Automobile accident (SAAQ, Box D)
• Precautionary work stoppage / other Quebec indemnities (Box E)
• Federal or other province indemnities (T5007)

Net federal supplements

Net federal supplements include non-taxable federal benefits for low-income seniors, such as the Guaranteed Income Supplement (GIS), Allowance, and Allowance for the Survivor.

Even though these amounts are not taxable federally, they must be reported on Line 148 of the TP-1 for provincial benefit and credit calculations. Use the amount shown on your T4A(OAS) slip. A corresponding deduction can be claimed on Line 295.

Special Cases – TP-1 Line 148 / Line 295:

Social benefits repayment: If you reported a social benefits repayment on Line 23500 of your federal return, see the “Special case” under Deduction for certain benefits in the instructions for Line 295.

Retroactive OAS or federal supplements: If you or your spouse received a retroactive Old Age Security (OAS) payment or federal supplement last year, see the “Special case” in the instructions for Line 447.

Important considerations:

Deduction on Line 295: The amounts you report on Line 148 generally entitle you to a deduction on Line 295, effectively making the income non-taxable.

Source codes: On your TP-1 return, you must also specify the source of the income replacement indemnity using a corresponding number in Box 149.

Financial assistance received further to a means test

For Quebec residents, financial assistance received based on a means test, needs test, or income test is generally not taxable, but must be reported on your tax returns. This ensures that your eligibility for other income-tested benefits and credits is calculated correctly

Other Indemnities – TP-1 Line 148

Box E of RL-5 (Quebec) or T5007 (Canada/other provinces): Report income replacement indemnities or compensation for loss of financial support received last year, including:

• Compensation due to acts of good citizenship or being a victim of a crime.
• Other indemnities under Quebec law.
• Indemnities under federal or other provincial law, such as workers’ compensation, precautionary work stoppage, or traffic accidents.

Indemnities for previous years:

• Income replacement indemnities owed for up to 17 years prior (e.g., 2005–2022 for a 2024 return).
• Compensation for loss of financial support owed for up to 16 years prior (e.g., 2006–2022 for a 2024 return).
• Quebec will calculate a tax adjustment on Line 443.
• Retroactive payments cannot be averaged.

Example :

Sophie Leclerc is a Quebec

Employment income (T4/RL-1 Box A): $25,000
Workers’ compensation benefits (CNESST – RL-5 Box C): $6,000
Guaranteed Income Supplement (GIS – T4A(OAS)): $2,400
Financial assistance based on means test (charity – RL-5 Box K): $500

Answer:

Total income reported (Lines 101 + 148) = 25,000 + (6,000 + 2,400 + 500) = 33,400

Deduction on Line 201 Deduction for Workeer) = $ 1,380

Deduction on Line 295 (for Line 148 items) = (6,000 + 2,400 + 500) = (8,900)

Taxable income on Line 26000 =$ 25,000

Taxable Income on Line 299 = $ 23,620 (33,400-8,900-1,380)

Description	Federal (T1 Return)	Quebec Provincial (TP-1 Return)
Tax slips	Income Replacement Indemnities: T5007 slip from a provincial workers' compensation board (non-Quebec). Net Federal Supplements: T4A(OAS) slip (Box 21) from Service Canada.	RL-5 slip: From the Ministère du Travail, de l'Emploi et de la Solidarité sociale for indemnities (CNESST, SAAQ, etc.). T4A(OAS) slip: Also used for reporting net federal supplements.
Reporting Income	Line 14400: T5007 indemnities. Line 14600: Net federal supplements (GIS and Allowance) from Box 21 of T4A(OAS).	Line 148: Indemnities from RL-5 and net federal supplements from T4A(OAS).
Claiming Deduction	Line 25000: Deduction for amounts reported on lines 14400 and 14600, making the income non-taxable.	Line 295: Deduction for the amount reported on Line 148, making the income non-taxable.
Source of Income	Workers' compensation (CNESST) and auto insurance (SAAQ) benefits are non-taxable for federal purposes for Quebec residents.	CNESST and SAAQ payments are issued under Quebec law and are non-taxable provincially.
Spousal Reporting	The spouse with the higher net income reports the social assistance or similar payments, even if the slip is in the other spouse's name.	The spouse with the higher net income reports the social assistance or similar payments.