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.
Principal Issues: Whether the payments made for spouse support pursuant to an award made by an arbitrator in Ontario, in compliance with the Ontario Family Law Act and Arbitration Act, can be considered to be an amount receivable under an order of a competent tribunal or a written agreement for the purposes of the definition of "support amount" in subsection 56.1(4) of the Income Tax Act (Canada).
Position: Yes.
Reasons: See response.
2009-031382
XXXXXXXXXX André Gallant
(613) 957-8961
August 14, 2009
Dear XXXXXXXXXX :
Re: Support Amount - Arbitration Award
This is in response to your letter of May 1, 2009, in which you asked whether an arbitration award would qualify as an "order of a competent tribunal" or a "written agreement" for purposes of the definition of "support amount" in subsection 56.1(4) of the Income Tax Act (Canada) (the "Act").
Based on your explanation, our understanding of the situation is as follows. In Ontario, under the Family Law Act, R.S.O. 1990, c. F.3 (the "FLA"), spouses can choose to have the issues arising out of marriage breakdown dealt with by arbitration rather than by going to court. The arbitration is governed by the FLA, and the Arbitration Act, 1991, S.O. 1991, c. 17 (the "AI"). The decision of the arbitrator is called an "award" and it is generally binding on the parties, unless it is set aside by a court of competent jurisdiction.
Our Comments
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office (the "TSO"). We are, however, prepared to offer the following general comments, which may be of assistance.
Whether an amount is receivable under an order of a competent tribunal or under a written agreement for the purpose of the "support amount" definition in subsection 56.1(4) is a question of mixed law and fact; it depends on the language used in the relevant provincial law and the agreements between the parties.
An arbitration award is not necessarily in all cases an order of a competent tribunal. The necessity to distinguish between arbitration award and order of a competent tribunal is evident, for instance, in the definition of "qualifying amount" in subsection 110.2(1). In connection with lump-sum averaging, subsection 110.2(1) defines a "qualifying amount" as including an amount that is received pursuant to "an order or judgment of a competent tribunal, arbitration award or a contract by which the payor and the individual terminate a legal proceeding".
Paragraph 13 of the Interpretation Bulletin IT-530R, Support Payments, describes an order of a competent tribunal as follows:
"An order of a competent tribunal is a decree, order or judgment made by a court or other competent tribunal. Nothing less than a concrete pronouncement, decree or direction of a tribunal empowered to make an order will constitute an order as required by the definition of support amount in subsection 56.1(4). An agreement deemed by a provincial court to be a court order for purposes of provincial maintenance enforcement legislation, will not, in and of itself, result in the agreement being considered an order made by a competent tribunal for the purposes of the Act."
A "competent tribunal" is generally one with legal jurisdiction granted by a federal or provincial statute to make an order or judgment, and includes a judicial or administrative tribunal.
An "order" is generally understood as any decision given by a judicial tribunal (i.e., court): see e.g. Wright v. MNR, 1964 CarswellNat 242 (TAB).
In the case of an arbitration award under the FLA, it would appear that the arbitrator is not empowered by the province of Ontario to make an order but rather the arbitrator is empowered by the parties to make an award under the family arbitration agreement. While an arbitral tribunal might be a competent tribunal, the award from the arbitrator would not constitute an "order" for the purpose of the FLA.
However, an arbitration award under the FLA could subsequently be made into an order from a judicial court. Such judicial order would constitute an "order of a competent tribunal" for the purposes of the definition of "support amount" in subsection 56.1(4).
Paragraph 13 of IT-530R explains a written agreement as follows:
"A written agreement may take the form of a written document under which a person agrees to make regular payments to maintain his or her current or former spouse or common-law partner, children of his or her current or former spouse or common-law partner, or both. The agreement should normally be duly signed and dated by both parties.
An exchange of written correspondence between the parties or their respective solicitors may be considered to be a written agreement if:
- there was the intention to create a binding and enforceable contractual relation;
- the exchange of written correspondence outlines all of the essential terms and conditions of the agreement in a clear and unambiguous manner; and
- there is a clear and unequivocal acceptance in writing by both parties of all those terms and conditions."
An arbitration award received under a family arbitration agreement could be considered, under the FLA and the general law of contract, to be a "written agreement" as contemplated by the definition of "support amount" in subsection 56.1(4). Where the arbitration award is considered to be binding on the parties under the FLA and general contract law, the arbitration award could be considered to be a written agreement. Whether this is so in a particular case is a question of fact to be resolved by a review of the documents and circumstances of the case.
We trust that these comments will be of assistance.
Yours truly,
S. Parnanzone
For Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 2009
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 2009
Email this Content