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When is income 'earned' and therefore deductible?

Case Study: A.S. and Economical

Domenic D. Nicassio
Domenic D. Nicassio
Associate Lawyer

January 2018

By Domenic D. Nicassio

When is post-accident income considered “earned” and therefore deductible from an Income Replacement Benefit?

A January 10, 2018, decision1 of Adjudicator Robert Watt provides useful guidance on the issue.

Section 7(3) of the SABS states that 70 per cent of any income from self-employment “earned” by the insured person after the accident may be deducted from an Income Replacement Benefit.

The issue becomes contentious with claimants who continue to earn income after an accident at a changed or reduced capacity.

Case Details

  • A.S. was a chiropractor who operated a chiropractic clinic prior to sustaining injury in an accident of November 18, 2015.
  • He performed all chiropractic services and was solely responsible for all business operation decisions up to that time.
  • After the accident, he withdrew from the clinic and hired another chiropractor to take his place.
  • He continued to attend the clinic to sign cheques, chat with patients, and administer minor treatments.
  • A new doctor was responsible for the day-to-day operations of the business.
  • A.S. continued to earn income after the accident, at just over half of his pre-accident income level ($63,175.08 in contrast to $124,997.90 the year before).

If its earned income, it's deductible...

A.S. took the position that he was not actively engaged in the business and therefore not “earning” income.

The adjudicator thought otherwise.

  • A.S continued to make major business decisions for the clinic.
  • He continued to pay salaries and hire staff.
  • Also significant was the fact his income was just over half of his pre-accident level, which was interpreted to mean “he was still involved substantially in the running of the business, and not in a nominal manner.”

But even if A.S. was not “actively” engaged in the business, the definition of income under the SABS would still require a deduction from the Income Replacement Benefit. As the adjudicator wrote:

...previous decisions have made it clear that the applicant does not need to be active in the business, for income to be attributed to the applicant for the purposes of deductibility under the Schedule.

Read the full case decision - FSCO 16-003197/AABS.


1 A.S. and Economical , Robert Watt (FSCO 16-003197/AABS, January 10, 2018).
2
Ibid. at para. 19.
3 Ibid. at para. 23.


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