26 July 2017
Paying child support in shared parenting cases - the new (ab)normal!
I have written about this issue before but this morning when I was reading a newsletter circulated by the folks at DIVORCEMATE I came across their article on Harder v. The Queen, 2016 TCC 197 I thought it was worth sharing. Both parents in a child sharing situation need to be aware of the potential consequences of not complying with the requirement that both parents actually and physically pay child support to the other. The old practice of paying an offset amount, is no longer acceptable.
"Beware of New Tax Court Ruling The allocation of the “eligible dependant credit” (formerly, the equivalent-to-spouse credit) in a shared parenting arrangement has recently come under intense discussion and scrutiny as a result of a recent decision of the Tax Court of Canada, Harder v. R., 2016 TCC 197. Until this decision, it was generally understood that in shared parenting, so long as any court order or written separation agreement provided that both parties were paying support, even if ultimately a “setoff” payment was made from one to the other for convenience, this would suffice to allow the parties to allocate the credit to the higher income parent. The basis for this understanding came from the Income Tax Act (“ITA”) and various guides and folios published by CRA. It is against this backdrop that the Tax Court of Canada released its Harder v. R. decision, and threw the family law bar into a tizzy. In this case, the parties had two children and had resolved all issues arising out of their separation pursuant to a written consent that was filed with the court. Despite the fact that the consent outlined both parties’ child support obligations in a shared parenting arrangement, and specifically provided that each party would each claim one of the children as a dependant for the eligible dependant tax credit, the Tax Court disallowed the allocation of the credit because ultimately a single setoff payment was paid by the higher income parent to the other. The court held that the “combined effect of subsections 118(5) and 118(5.1) [of the ITA], at a minimum, requires a comprehensive documentary and evidentiary record... Surely cheques, or even their more modern replacement of recurring e-transfers, may evidence a clearly enumerated, reciprocal and mandatory support amount paid by each spouse to the other” (par 11). The unfortunate conclusion of this case is that it now appears necessary to not only provide that both parties are paying support to one another in any written court order or agreement, but the parties must now actually do so, creating the necessary “documentary and evidentiary record”. Aside from the unnecessarily cumbersome two-way exchange of money, this raises concerns where one parent pays his/her share, but the other parent does not. This leads to a particularly ridiculous result when the “deadbeat” parent is the higher income earner - not only would the lower income parent not get the support required, but he/she would be supplementing the deadbeat parent as well! Unfortunately, until such time as the court or the legislators revisit this issue, this is the result with which we are left."
Karen F. Redmond
Family Law Lawyer