Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: A XXXXXXXXXX separation agreement was amended on XXXXXXXXXX , to provide for child support payments of $XXXXXXXXXX per month, commencing on XXXXXXXXXX . Do the new child support rules apply as a result of the second agreement?
Position: No
Reasons: No "commencement day" as per subsection 56.1(4).
XXXXXXXXXX 2001-007892
M. Eisner, CA
July 4, 2001
Dear XXXXXXXXXX:
Re: Child Support
This is in reply to your letter of April 6, 2001, concerning the above- noted subject. We also acknowledge your submission made to us on May 7, 2001.
It is our understanding that you and XXXXXXXXXX entered into a separation agreement (the "First Agreement") on XXXXXXXXXX , under which you and XXXXXXXXXX agreed to live separate and apart from each other on a permanent basis, and each of you would pay 50% of the expenses in respect of your two children. On XXXXXXXXXX, you and XXXXXXXXXX entered into another agreement (the "Second Agreement") that amended the First Agreement. One of the terms of the Second Agreement was that XXXXXXXXXX was required to pay you $XXXXXXXXXX per month for child support commencing on XXXXXXXXXX. You have asked us whether the child support payments are required to be included in your income pursuant to the old child support rules, or whether they fall under the new child support rules.
As you know, the basic thrust of the new child support provisions is to eliminate both the requirement to include child support in the custodial or recipient parent's income and the deduction available to payers of child support. That is, in general terms, child support amounts payable and receivable pursuant to a written agreement or court order on or after its "commencement day", as defined in subsection 56.1(4) of the Income Tax Act (the "Act"), are subject to the new rules and, as such, are not deductible by the payer and are not required to be included in the income of the recipient. Child support payments made pursuant to an agreement or order that has no "commencement day" will, generally, be subject to the old rules and will be deductible for the payor and taxable to the recipient.
Paragraph (a) of the definition of "commencement day" states that an agreement or order made after April 1997 will have a "commencement day" on the day the agreement or order is made. However, by virtue of paragraph (b) of the definition of "commencement day", an agreement or order made before May 1997 will also have a "commencement day", and fall under the new rules, if:
(i) the parties both sign and file an election with the Canada Customs and Revenue Agency agreeing that the new tax rules will apply to the existing agreement or order as of a specified date (no earlier than May 1, 1997),
(ii) the agreement or order is varied after April 1997 to change the child support amounts payable to the recipient,
(iii) another agreement or order is made after April 1997 and the effect of the subsequent agreement or order is to change the total child support amounts payable to the recipient by the payer, or
(iv) the agreement or order specifically provides that the new tax rules will apply as of a specific date (no earlier than May 1, 1997).
In your situation, there appears to be no agreement that specifically indicates that the new child support rules will apply, such that (iv) above cannot apply, and it appears that (i) above does not apply. In addition, based on the information provided, it is clear that the Second Agreement was not "made" after April 1997. This agreement clearly indicates that it is made XXXXXXXXXX, and it was witnessed in XXXXXXXXXX. Accordingly, the information you provided to us indicates that none of the above agreements has a "commencement day"; such that the new child support rules cannot apply. As a result, in our view, you would be required to include in your income the child support amounts paid to you under the Second Agreement (pursuant to paragraph 56(1)(b) of the Act).
We trust that our comments are of assistance to you.
Yours truly,
Milled Azzi, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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