Weekly incapacity benefits which are paid for loss of Reserve income are not considered to be taxable income because they are considered to retain the original nature of the salary payment. In other words, Reserve earnings are not taxable so compensation for loss of ability to earn in the Reserve is also considered not to be taxable.
Non-taxable lump sum redemptions must not be made through DEFCARE/DOLARS but should be processed through PMKeyS using Earnings Codes M61 for Section 30 and M70 for Section 137 redemptions.
The formula used in calculating the redemption amount under Subsection 30(2) applies the number of days to [glossary::469]. This may seem anomalous given that Reserves would not normally serve beyond age 55 (indeed some categories of full-time employee e.g. Pilots would not normally serve beyond age 45). However, the SRCA provides no discretion to vary the formula used and the redemption in such cases is calculated to age [glossary::469].
When determining whether the weekly amount of compensation (Section 19, 20, 21 or 21A) falls below the statutory amount under Section 39(1)(b) of the SRCA, the employee's Reserve income should not be viewed in isolation. A redemption should not be considered without first combining both Reserve and civilian normal weekly earning and ability to earn and assessing the likelihood of a change to the level of incapacity in BOTH the employee's Reserve AND civilian employment.