Last week, the federal government introduced draft legislation that would retroactively (back to 2011) change the definition of a shared-custody parent to a parent that resides with the child at least 40 per cent of the time in a month. As the government explained in a backgrounder, “This test is intended to be consistent with the concept of shared custody in the Federal Child Support Guidelines.”
If passed, the legislation could go a long way toward clarifying disputes that have arisen surrounding the Canada Child Benefit (CCB), a government program that provides low- and middle-income Canadian families with tax-free funds each month to help with the cost of raising children. For the 2019-20 benefit year, this translates to about $24 billion paid to families who are supporting over six million children, with the average family receiving about $7,000 of tax-free government assistance.
The CCB is paid to the parent who is “primarily” in charge of the care and upbringing of the child. Under tax rules, the primary caregiver is deemed to be the female parent when a male and a female parent live together in the same household as the child, unless the female parent notifies tax authorities otherwise.
For parents who are separated or divorced, however, the rules that determine whether each parent can collect CCB payments depend on whether the parents have shared custody. Under the Income Tax Act, a parent is considered to be a “shared-custody parent” if the child lives with each parent in separate residences on a “more or less equal basis.” For example, the child might regularly alternate between residences, spending four days with one parent and three days with the other or alternating one week with one parent and the next week with the other parent.
In such a shared custody arrangement, both parents must be primarily responsible for the child’s care and upbringing when the child lives with them. If this is the case, each parent is entitled to 50 per cent of the CCB payment he or she would have received if the child lived with them all of the time. Absent a shared custody arrangement, however, only one parent would be entitled to 100 per cent of the CCB payments.
A couple of recent Federal Court of Appeal cases have caused concern among divorced parents who risk losing some or all of their CCB payments. The cases delved into how the phrase “more or less equal” when determining where a child resides should be interpreted. Does it necessarily mean 50/50? Or is something approximating an even split still considered to be equal? The answer, as we will see, can be the difference between receiving thousands of dollars a year in CCB benefits and receiving nothing at all.
The Ontario father
The first case involved an Ontario father who went to Tax Court in 2017 arguing that he should be entitled to 50 per cent of the Canada child tax benefit (the predecessor to the CCB) payments for his son. A court order gave the divorced parents joint custody of their son but the son was to reside primarily with his mother. The father prepared a calculation which showed that his son resided with him 146 out of 365 days, which amounted to 40 per cent of the time.
The Tax Court judge concluded that “the phrase ‘equal or near equal basis’ does not permit a very wide variation from equal residence… A child who spends 40 per cent of his or her time with one parent spends only two-thirds as much time with that parent as the other.” The judge therefore concluded that the father was not a shared custody parent and thus was not entitled to any CCTB payments.
The father appealed this decision to the Federal Court of Appeal, which earlier this year dismissed the appeal, agreeing with the lower court.
The Newfoundland mother
The second case involved a Newfoundland mother who originally went to Tax Court in 2016, arguing that she should she be entitled to 100 per cent rather than 50 per cent of the CCTB payments for her son. Under a 2010 court order, both parents were awarded “joint custody and shared parenting of the child of the marriage.”
Their agreement stated that they would “share the parenting of the child … on a week to week rotation wherein the Father shall pick up the child at 2:00 p.m. on Thursdays and drop off the child to daycare on Wednesday mornings. The Mother will have care of the child from Wednesday until the following Thursday when the Father’s schedule will resume at 2:00 p.m.”
A CRA auditor reviewed this biweekly schedule and then calculated the number of hours in a two-week period that the child would be with each parent and concluded that their son spent 41.37 per cent of the time with his father and 58.63 per cent of the time with his mother.
The Tax Court judge, after reviewing multiple cases that considered the amount of time that the child spent with each parent, concluded that in this case, the child resided with each parent on a “near equal basis and were shared-custody parents.” As a result, they had to share the CCTB payments.
The mother appealed the decision to the Federal Court of Appeal, which earlier this year overturned the lower court’s decision, ruling that given the percentages involved, the parents “did not reside with (their son) on a ‘near equal’ basis,” meaning that the mother was not a shared-custody parent and was thus entitled to 100 per cent of the CCTB payments.
While the CRA is currently seeking leave to appeal this decision to the Supreme Court of Canada, as the CRA’s longstanding interpretation of shared parenting meant that a child generally lives with the parent between 40 per cent and 60 per cent of the time, the new draft legislation introduced last week seems to have solved the CRA’s concerns, making the leave to appeal application likely irrelevant.