In Family Law, parenting arrangements whereby both parties have a child in his and her respective care for at least 40% of the time are identified as shared parenting arrangements for child support purposes, and otherwise.
However, a 2019 decision by the Federal Court of Appeal set an entirely different percentage threshold when it came to entitlement to the Canada Child Benefit (“CCB”).
Pursuant to section 122.6 of the Income Tax Act, a parent qualifies as a shared-custody parent when the following conditions are satisfied:
- The individual must be one of the two parents of the qualified dependent;
- The two parents must not be cohabiting spouses or common law partners of each other;
- The individual and the other parent must reside with the qualified dependent on an equal or near equal basis; and
- The individual and the other parent must primarily fulfil their responsibility for the care and upbringing of the qualified dependent when residing with the qualified dependent, as determined in consideration of prescribed factors.
In Morrissey v. Canada, 2019 CarswellNat 856 (which followed the 2017 Tax Court of Canada case Lavrinenko v. the Queen), the trial judge concluded that both “equal” and “near” determined that the expression “near equal” could not be restricted to only a very slight variation from a 50/50 split but that neither did the language suggest a very wide variation from same. In so reasoning, the trial judge held that since the Father resided with the son during the Benefit Period somewhere between 57% and 59% of the time, this constituted a “near equal basis”. Therefore, he found that the parties were shared-custody parents and each entitled to 50% of that amount of Canada Child Benefit they would each otherwise receive if they were the only (or primary) caregiver.
The Federal Court of Appeal found the trail court had erred, holding that based on the trail judge’s findings of fact the percentage in this case did not meet the “near equal” condition under the ITA. The Court of Appeal held “near equal” means “almost equal” and that any percentage of time that cannot be rounded up to 50% would not qualify as near equal. Specifically, any percentage between 45-49% should be rounded up to 50%, while 41-44% should be rounded down to 40%. Therefore, 40% would not qualify as near equal and the parties not shared-custody parents, at least for purposes of the Canada Child Benefit. The father was therefore not entitled to receive the Benefit.
In recent months, this case has caused a real stir among family law lawyers tasked with drafting agreements with respect to custody and access, forcing the consideration of whether percentages ought to be specified with a view to CCB eligibility, and whether more Income Tax Act-centric language ought to be utilized throughout (“near equal”). In short, this case muddied the waters.
The good news though, is that the Minister of Finance issued a press release on August 29th, 2019, setting out that the government intends to propose an amendment to the Income Tax Act, intended to provide clarification re: eligibility and in turn ensure that benefits paid to families in shared parenting arrangements are not stopped or interrupted.
Although all of the details are not yet known, the government’s proposed amendment to the Income Tax Act would effectively replace the “equal or near equal” test with “approximately equal”. Under this test, CRA would be permitted the flexibility to recognize shared parenting arrangements where parents have care of the child at least 40% of the time in a month OR on an “equal or approximately equal basis” and primarily fulfill the responsibility for the care and upbringing of the child when that child is residing with that parent.
This would remove the current inherent contradiction with the Family Law definition of “shared parenting” and provide much-needed clarification for parents in such shared parenting arrangements in navigating the CCB.