Tuition Waiver

Wednesday, February 8, 2006


Written by Rachna Mutreja

On January 31, 2006, Nancy Sullivan, Vice President of Finance and Administration at the University of Guelph, sent out a letter to all employees who have dependents/spouse who attend the University of Guelph and receive benefits of the Tuition Scholarship Plan. The letter was in regards to the university’s scholarship program, which was under a recent employer compliance audit by Canada Revenue Agency (CRA). The CRA came to the decision that any scholarship given under the Tuition Scholarship Plan for dependents is a taxable benefit on the T4 of the recipient of the scholarship and not the employee. The university and legal counsel tried to fight this decision but there were regrettably unsuccessful.

Up until this decision was made, the scholarship was given as income to the employee of the university and not the dependent or spouse. Hence, the scholarship was taxed by the recipient of the scholarship and not the employee and the T4 statement was issued to the dependent/spouse as income for the student.

The CRA has not determined that the scholarships are a taxable benefit for the employee even though the scholarship is given to the student. This new instruction is to be implemented on T4 slips 2005 and must be included in tax forms to be filed for last year. Not only is the CRA asking employees to pay taxes on this scholarship for last year, the CRA is charging employees taxes as far back as 2003. Additionally, a 7% interest charge will be placed upon these taxes. Many employees of the university are affected by this decision and now have to find money that they did not budget for.

The University of Guelph is offering an interest free loan to employees which will be deductible from their pay cheques since these back taxes will cause additional financial hardships for employees and their dependents/spouse. The university has negotiated all they can with the CRA but they refuse to change their decision or implement this rule starting this year. Many families will have to re-budget for the year and find alternative means for paying these taxes that they were not prepared for.

The university is trying to minimize the hardships as best as they can through the interest-free loans. However, eventually these loans will also have to be paid back. This decision is currently out of the hands of the university and will have to be addressed at the provincial and federal level for those who are concerned with the issue. Additionally Steelworkers Local 4120 is trying to address this issue and investigate the matter with their legal department.

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