Tax Credits and Parenting Time – Part 2

The Canada Child Benefit

PART 2: The Canada Child Benefit (CCB)

In this series of posts, we are looking at different tax credits and benefits that are affected by relationship breakdown and specifically the parenting schedule and child support arrangements. Our last post looked at the eligible dependent credit. Next up: The Canada Child Benefit!

What is the Canada Child Benefit?

The Canada Child Benefit (CCB) is a tax-free monthly payment made to eligible families to assist with the expense of raising children under the age of 18.

Who can apply for the CCB?

To be eligible for the CCB, you must meet all the following conditions:

  1. you live with a child who is under 18;
  2. you are “primarily responsible” for the care and upbringing of the child;
  3. you are a resident of Canada for tax purposes; and
  4. you or your spouse must be a Canadian citizen, permanent resident, protected person, temporary resident (depending upon various conditions set out by the Canada Revenue Agency [CRA]), or an individual who is or may be registered under the Indian Act.

What does “primarily responsible” mean?

For the purposes of applying for the CCB, a person is “primarily responsible” for a child when they are responsible for things like the following:

  1. supervising the child’s daily activities;
  2. ensuring the child’s medical needs are met; and
  3. arranging for child care when necessary.

Why does my parenting schedule matter?

In this instance, the parenting schedule you and the other party decide is in your child’s best interests will dictate who is “primarily responsible” for the child and by extension who can apply for the CCB. For example:

  1. If your child lives primarily with you, (“primarily” is defined as more than 60% of the time), then you alone will apply for the CCB, provided you meet the other criteria set out in the Income Tax Act.
  1. If your child lives primarily with the other party (that is, the child lives with you less than 40% of the time), then you are not considered to be “primarily responsible” for the child and should not apply for the CCB.
  1. If your child lives with both you and the other party in a shared parenting arrangement (“shared parenting” is defined as at least 60/40), then both you and the other party should apply for the CCB. In this instance, you will each get 50% of what you would have received if the child resided primarily with you.

Can’t I just agree to a different percentage sharing of the CCB and specify this percentage sharing in our Separation Agreement?

The short answer: no. The case law is very clear that jurisdiction over and distribution of the CCB is solely a matter for the CRA, and that separation agreements and court orders cannot override income tax legislation. For example, in BM v AM, 2021 ONSC 6807, the parties had entered into a separation agreement that specified that the wife would continue to receive the CCB (then referred to as the Child Tax Benefit or CTB) as well as other benefits for both children. However, the parties were in a shared parenting arrangement. As such, when the husband was re-assessed and provided the Agreement to the CRA at the CRA’s request, the CRA adjusted the CCB based on the actual parenting schedule, resulting in the wife losing a significant amount of money. The court found that the husband could not be blamed for this as the “court cannot override the jurisdiction of Canada Revenue Agency”.

The takeaway? You cannot receive 100% of the CCB if you are in a shared parenting arrangement, even if the other party does not apply for the CCB and even if your Separation Agreement specifies that you are to receive 100% of the CCB despite being in a shared parenting arrangement. Further, if one parent says they have primary responsibility, and the other parent says parenting is shared, the CRA can audit and they will want more documentation to support the claims. Finally, the CRA will not use different percentages simply because they are in your Separation Agreement.

If you have more questions about parenting schedules and preparing separation agreements that work for your family, please contact one of the family litigation lawyers at Richardson Hall LLP to see how we can help.

*This article contains information but is not intended to provide legal advice.

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