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:
Will the provision in a pre-May 1997 divorce agreement to reduce child support payments upon a child reaching 18 years of age, trigger the application of the new child support rules when the child reaches 18 in 1998?
Position TAKEN:
No.
Reasons FOR POSITION TAKEN:
An increase or decrease in child support amounts payable under an agreement or court order made before May 1997, as a consequence of automatic changes in child support amounts that are built into the agreement or order, will not, in and by itself, cause the agreement or order to have been varied (within the meaning of subparagraph (b)(ii) of the definition of "commencement day" in subsection 56.1(4)).
XXXXXXXXXX 5-982373
M. Azzi
September 30, 1998
Dear Sir:
Re: Child Support
This is in reply to your letter of September 10, 1998, regarding the tax treatment of child support payments.
You indicate that, under a divorce agreement (the "Agreement") dated XXXXXXXXXX, you have been paying $XXXXXXXXXX per month to your former spouse for the support of your two children. We understand that your child support will be reduced to $XXXXXXXXXX per month, pursuant to the Agreement, as your oldest daughter has just attained 18 years of age and you are no longer required to pay child support for her. You enquire whether this change in the amount of child support, in accordance with the terms of a pre-May 1997 agreement, will trigger the application of the new child support rules.
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. Generally, the new rules apply to agreements or court orders made after April 1997. However, by virtue of the definition of "commencement day" in subsection 56.1(4) of the Income Tax Act, the new rules apply to child support amounts paid under the terms of an agreement or order made before May 1997 if:
1. the parties both sign and file an election with the Department agreeing that the new tax rules will apply to the existing agreement or order after a specified date (no earlier than May 1, 1997),
2. the agreement or order is varied after April 1997 to change the child support amounts payable to the recipient,
3. 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
4. the agreement or order specifically provides that the new tax rules will apply after a specific date (no earlier than May 1, 1997).
Based on the information provided, it does not appear that 1 or 4 above applies to your circumstances. It also does not appear that 3 above applies, as no new agreement or order has been made. As regards to the situation described in 2 above, it is our view that an increase or decrease in child support amounts payable under an agreement or court order made before May 1997, as a consequence of automatic changes in child support amounts that are built into the agreement or order, will not, in and by itself, cause the agreement or order to have been varied. Accordingly, the provision in your 1993 Agreement to reduce your child support payments to $XXXXXXXXXX per month upon your oldest child reaching 18 years of age, should not trigger the application of the new child support rules.
We trust that these comments will be of assistance.
Jim Wilson
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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