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:
In general terms, subsection 60.1(3) of the Act (paragraph 56.1(3) of the Act is the converse of this provision) may result in the deduction of payments made before the date of an order or agreement where the date of the order or agreement is post-April 1997. However, where an agreement or order, made after April 1997, varies a child support amount payable from the last payment made before May, 1997, the day on which the first payment of the varied amount is required to be made is considered to be the "commencement day". (If there is a commencement day, child support payments payable on or after that day would be tax neutral - no deduction and no income inclusion)
The issue is whether there is a commencement day in respect of two examples.
In the first example, H paid C $300 a month is child support from September, 1996 to May, 1997 inclusive. In June, 1997, H increased the monthly payment to $400. H and C signed a separation agreement on October 15, 1997, which recognized the previous payments and increased the monthly child support to $500 starting on November 1, 1997.
In the second example, R and M separated in 1996. One of the two children lived with R and the other child lived with M. Before their court order was made on October 8, 1997, R paid M monthly support of $500. The court order grants custody of the two children to M. It also recognizes R's previous payments for the one child and requires continuing monthly support for both children of $500 (effective as of the date of the court order).
Position:
In the first example, the commencement day is June of 1997. In the case of the second example, the commencement day is October 8, 1997.
Reasons:
Example 1 - The agreement is deemed to have been made in September 1997; but since the agreement, with respect to June of 1997, varies the amount payable from the amount in April, 1997, the commencement day is considered to be June of 1997.
Example 2 - The agreement varies the amount payable in October from the amount in April, 1997 ($500 for one child in April to $500 for children in October)
June 19, 1997
Benefits Program Directorate HEADQUARTERS
Sharon Yetts M. Eisner
(613) 957-8953
971391Child Support Payments - New Regime
This is in reply to your facsimile sent to us on May 22, 1997 concerning the above-noted subject.
You have requested our view on two examples, which involve the new child support rules in their application to paragraph 56.1(3)(b) of the Income Tax Act (the Act). The examples are set out below.
Example 1
H paid C $300 a month in child support from September, 1996 to May, 1997 inclusive. In June, 1997, H increased the monthly payment to $400. H and C signed a separation agreement on October 15, 1997, which recognized the previous payments and increased the monthly child support to $500 starting on November 1, 1997.
With respect to the above example, you have indicated that monthly child support of $500 is different from the last prior payment of $300 made before May, 1997. However, the first time that the child support differed from the amount of $300 occurred in June, 1997, when H paid $400. It follows that as a result of the exception set out in paragraph 56.1(3)(b) of the Act, the "commencement day" is deemed to be the day on which the payment of $400 was required to be made. You have also indicated that if there had been no increase before the agreement was made, the commencement day would be deemed to be November 1, 1997.
We agree with your analysis.
Example 2
In the second example, R and M separated in 1996. One of the two children lived with R and the other child lived with M. Before their court order was made on October 8, 1997, R paid M monthly support of $500. The court order grants custody of the two children to M. It also recognizes R's previous payments for the one child and requires continuing monthly support for both children of $500 (effective as of the date of the court order).
You have indicated that in recognizing the previous payments for one child, but in making continued child support payable in the amount of $500 for both children, the order has varied "a child support amount payable from the amount of the last prior payment made before May 1997" for the purposes of paragraph 56.1(3)(b) of the Act. It is, accordingly, your view that the commencement day is October 8, 1997.
We agree with your views.
If you require further technical assistance, we would be pleased to provide our views.
John F. Oulton
Section Chief
Business, Property & Employment Section II
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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