The Canada Child Benefit and Shared Custody Arrangements
The Canada Child Benefit (or CCB) is a tax-free monthly benefit payment provided to qualifying Canadian families to help with the cost of raising their dependent children.
The CCB is provided to the person who is primarily responsible for raising and caring for the child. Where two individuals who are spouses or common-law partners reside together, it is usually the female parent who is presumed by the CRA to be the person responsible for raising the child and so should be the one applying for CCB. However, in cases where the other partner may be the primary caregiver of the children in the home, they can claim the CCB if they provide a letter from the female parent attesting to the situation.
For same-sex parents, the CRA outlines that only one parent should apply for all the children in the home.
Where the parents of the children are separated, the CRA will consider the custody sharing arrangement to determine which parent is entitled to the CCB.
Primary Custody Arrangement
If a child resides with one parent majority of the time, that is more than 60% of the time, and that parent is responsible for caring for and raising the child, then he or she will be entitled to the full amount of the CCB based on their household income.
Shared Custody Arrangements
Section 122.6 of the Income Tax Act outlines that shared custody applies to scenarios where the child resides with both parents on a more or less equal basis. A shared custody parent must meet the following requirements:
- The individual must be one of the two parents of the qualified dependant;
- The two parents must not be cohabiting spouses or common law partners;
- The individual and the other parents must reside with the qualified dependent on an equal or near equal basis; and
- The individual and the other parent must primarily fulfil the responsibility for the care and upbringing of the qualified dependant when residing with them.
If all the above criteria are met, the CRA will provide each parent with 50% of what they would have received if they had full custody of the child, based on respective adjusted family net incomes.
However, it is not always clear what the term “equal or near equal basis” means. The Federal Court of Appeal (FCA) has recently provided guidance on the term and delineated what constitutes an equal or near equal basis.
In Lavrineko v. Canada, the FCA determined that the equal or near equal refers to time in a quantitative sense only, and not to any qualitative factors, as opposed to those listed in Income Tax Regulation 6302. The court held that the words “near equal” do not change the overall meaning of the word “equal”, and that it only serves to relieve parents from having to keep very detailed records of every hour that the parent resides with the child. Nonetheless, the time spent with the child, based on a percentage of time spent, should be able to be rounded to 50% and that any percentage that cannot, does not qualify as near equal. Specifically, any percentage between 45% and 49% should be rounded upwards to 50%, while any percentage between 41% and 44% should be rounded downwards to 40%.
The Court in Morrissey v. Canada confirmed the Judge’s analysis in Lavrineko and held that based on the tax court’s initial finding of fact that the parents resided with their child somewhere between a 57.14%/42.86% and 59.38%/40.62% of time, that the percentages could be properly rounded down to 40% of the time. This resulted in a determination that the parents were not in fact “shared custody” parents as defined by section 122.6 of the Income Tax Act.
Contrastingly, in Jersak v. The Queen, the court held that a custody percentage ratio that ranged from 53-47% to 54-46% in the specified years was determined to be a ratio that met the definition of shared custody parents under the Income Tax Act. Both parents were entitled to 50% of the CCB, adjusted based on their respective household incomes.
If you are having trouble with determining whether you are considered a shared custody parent under the Income Tax Act or undergoing other difficulties with claiming CCB – Contact us to schedule an appointment with our team of experts. We are here to help!
This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in the articles. If you have specific legal questions, you should consult a lawyer.