How CRA divvies up Canada Little one Profit for folks who share custody

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Mother and father who’re separated or divorced and share custody of their children needs to be conscious that the period of time the youngsters spend with every dad or mum will be the determinative issue into how a lot, if any, of the Canada Little one Profit they could obtain. A current tax case delves into the complexity of this challenge. However first, a CCB refresher.

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The CCB is a authorities program that gives low- and middle-income Canadian households with tax-free funds every month to assist with the price of elevating youngsters. For the 2022 profit 12 months, the overall CCB estimated funds is projected to be about $26 billion, paid to greater than 3.5 million households.

For the profit 12 months starting subsequent month, if your loved ones revenue was lower than about $32,800 in 2021, you may get the utmost CCB: practically $7,000 for every little one underneath the age of six, and virtually $6,000 for every little one aged six to 17. (The funds progressively lower as soon as household revenue is above $32,800.)

The CCB is paid to the dad or mum who’s “primarily” answerable for the care and upbringing of the kid. For fogeys who’re separated or divorced, nevertheless, the foundations that decide whether or not every dad or mum can acquire CCB funds depend upon whether or not the mother and father have shared custody.

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New laws launched in 2021, however retroactive to 2011, expanded the definition of a shared-custody dad or mum to 1 who both resides with the kid at the least 40 per cent of the time in a selected month, or “on an roughly equal foundation.”

In a shared-custody association, each mother and father should be primarily accountable for the kid’s care and upbringing when the kid lives with them. If that is so, every dad or mum is entitled to 50 per cent of the CCB cost she or he would have obtained if the kid lived with them on a regular basis (based mostly on their very own household revenue.) Absent a shared-custody association, nevertheless, just one dad or mum can be entitled to 100 per cent of the CCB funds.

The current tax case explored whether or not a dad or mum who didn’t fairly meet the 40-per-cent take a look at in a selected month might nonetheless qualify to obtain the CCB that month based mostly on the argument that the youngsters lived with that dad or mum all through the remainder of the 12 months on “an roughly equal foundation.”

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Mother and pa have three children. They separated in December 2018. Mother claimed the month-to-month CCB from January 2019 by means of June 2021. The Canada Income Company initially paid 100 per cent of the profit to her, however it later concluded that each mother and pa had been shared-custody mother and father and so dad was entitled to half the CCB (based mostly on his web revenue).

The important thing challenge earlier than the court docket was whether or not mother ought to have been entitled to say the complete CCB for the youngsters throughout the whole interval. The CRA took the place that mother was not entitled to the complete CCB as a result of she was a shared-custody dad or mum and, due to this fact, solely entitled to half of the profit.

At trial, the decide defined that entitlement to the CCB is decided on each a child-by-child foundation and a month-by-month foundation. In reviewing the proof, the decide discovered that for the reason that couple’s youngest little one wasn’t sufficiently old to attend college in the course of the months in query and the kid’s care in the course of the day on weekdays fell solely to mother, it couldn’t be mentioned that the kid resided with dad at the least 40 per cent of the time.

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It was additionally clear from the proof that mother was the first caregiver of the opposite two children throughout the next durations: January to March 2019 (the months instantly following the separation, when dad’s housing was “unstable”), July and August 2019 (when there was no college), and April 2020 to June 2021 (initially, when the colleges had been closed as a consequence of COVID-19; later, after they had been off college for the summer season of 2020; and from September 2020, when mother started homeschooling them.)

From April to June 2019, mother supplied the court docket with calendars that recorded the place the youngsters slept throughout these months. Dad, then again, had no information of his time with the kids throughout these months and “little in the way in which of a particular recollection.” Accordingly, the decide discovered that dad didn’t meet the 40-per-cent assessments throughout this era.

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As for the months from September 2019 by means of February 2020 (aside from December), when mother and pa established a set schedule, the decide concluded that the eldest children had been with dad at the least 40 per cent of the time. That left solely two months in dispute: December 2019 and March 2020.

The proof was clear that dad primarily by no means cared for the kids in the course of the day on weekdays after they had been on college trip. The care that might in any other case have been supplied by the kids’s college was, due to this fact, left to be supplied by mother. In every of December and March, the proof confirmed that mother cared for the youngsters when college was out as a result of Christmas and spring break holidays.

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The decide then turned to the brand new laws, which contemplates a scenario the place a dad or mum who usually meets the 40-per-cent threshold briefly slips under it in a given month due to, for instance, sickness, trip or one thing comparable.

“The addition of the ‘roughly equal foundation’ take a look at seems to have been designed to acknowledge that irregularities in a given month could upset an in any other case established schedule however that, over time, these irregularities will stability out,” the decide mentioned.

However that was not the case right here, in accordance with the decide. “College holidays (and the summer season months) usually are not uncommon occasions … These 4 breaks happen repeatedly every year and collectively contain a good portion of the 12 months. They go away mother and father ready of both having to care for his or her school-age youngsters throughout what would in any other case be the varsity day or having to search out an alternate type of little one care.”

Thus, the decide concluded that the youngsters didn’t reside at the least 40 per cent of the time with dad in the course of the months of December 2019 and March 2020, and so mother was entitled to 100 per cent of the CCB in these months.

Jamie Golombek, CPA, CA, CFP, CLU, TEP, is the managing director, Tax & Property Planning with CIBC Personal Wealth in Toronto. Jamie.Golombek@cibc.com

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