How CRA divvies up Canada Child Benefit for parents who share custody

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Parents who are separated or divorced and share custody of their kids should be aware that the amount of time the kids spend with each parent can be the determinative factor into how much, if any, of the Canada Child Benefit they may receive. A recent tax case delves into the complexity of this issue. But first, a CCB refresher.

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The CCB is a government program that provides low- and middle-income Canadian families with tax-free funds each month to help with the cost of raising children. For the 2022 benefit year, the total CCB estimated payments is projected to be about $26 billion, paid to more than 3.5 million families.

For the benefit year beginning next month, if your family income was less than about $32,800 in 2021, you can get the maximum CCB: nearly $7,000 for each child under the age of six, and almost $6,000 for each child aged six to 17. (The payments gradually decrease once family income is above $32,800.)

The CCB is paid to the parent who is “primarily” in charge of the care and upbringing of the child. For parents who are separated or divorced, however, the rules that determine whether each parent can collect CCB payments depend on whether the parents have shared custody.

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New legislation introduced in 2021, but retroactive to 2011, expanded the definition of a shared-custody parent to one who either resides with the child at least 40 per cent of the time in a particular month, or “on an approximately equal basis.”

In a shared-custody arrangement, both parents must be primarily responsible for the child’s care and upbringing when the child lives with them. If this is the case, each parent is entitled to 50 per cent of the CCB payment he or she would have received if the child lived with them all the time (based on their own family income.) Absent a shared-custody arrangement, however, only one parent would be entitled to 100 per cent of the CCB payments.

The recent tax case explored whether a parent who didn’t quite meet the 40-per-cent test in a particular month could still qualify to receive the CCB that month based on the argument that the kids lived with that parent throughout the rest of the year on “an approximately equal basis.”

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Mom and dad have three kids. They separated in December 2018. Mom claimed the monthly CCB from January 2019 through June 2021. The Canada Revenue Agency initially paid 100 per cent of the benefit to her, but it later concluded that both mom and dad were shared-custody parents and so dad was entitled to half the CCB (based on his net income).

The key issue before the court was whether mom should have been entitled to claim the full CCB for the kids during the entire period. The CRA took the position that mom was not entitled to the full CCB because she was a shared-custody parent and, therefore, only entitled to half of the benefit.

At trial, the judge explained that entitlement to the CCB is determined on both a child-by-child basis and a month-by-month basis. In reviewing the evidence, the judge found that since the couple’s youngest child wasn’t old enough to attend school during the months in question and the child’s care during the day on weekdays fell solely to mom, it could not be said that the child resided with dad at least 40 per cent of the time.

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It was also clear from the evidence that mom was the primary caregiver of the other two kids during the following periods: January to March 2019 (the months immediately following the separation, when dad’s housing was “unstable”), July and August 2019 (when there was no school), and April 2020 to June 2021 (initially, when the schools were closed due to COVID-19; later, when they were off school for the summer of 2020; and from September 2020, when mom began homeschooling them.)

From April to June 2019, mom provided the court with calendars that recorded where the kids slept during those months. Dad, on the other hand, had no records of his time with the children during these months and “little in the way of a specific recollection.” Accordingly, the judge found that dad didn’t meet the 40-per-cent tests during this period.

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As for the months from September 2019 through February 2020 (other than December), when mom and dad established a fixed schedule, the judge concluded that the eldest kids were with dad at least 40 per cent of the time. That left only two months in dispute: December 2019 and March 2020.

The evidence was clear that dad essentially never cared for the children during the day on weekdays when they were on school vacation. The care that would otherwise have been provided by the children’s school was, therefore, left to be provided by mom. In each of December and March, the evidence showed that mom cared for the kids when school was out due to the Christmas and spring break holidays.

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The judge then turned to the new legislation, which contemplates a situation where a parent who normally meets the 40-per-cent threshold temporarily slips below it in a given month because of, for example, illness, vacation or something similar.

“The addition of the ‘approximately equal basis’ test appears to have been designed to recognize that irregularities in a given month may upset an otherwise established schedule but that, over time, these irregularities will balance out,” the judge said.

But that was not the case here, according to the judge. “School holidays (and the summer months) are not unusual events … These four breaks occur regularly each year and collectively involve a significant portion of the year. They leave parents in a position of either having to care for their school-age children during what would otherwise be the school day or having to find an alternative form of child care.”

Thus, the judge concluded that the kids didn’t reside at least 40 per cent of the time with dad during the months of December 2019 and March 2020, and so mom was entitled to 100 per cent of the CCB in those months.

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

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