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 written agreement dated XXXXXXXXXX , requires the father of the children to pay $XXXXXXXXXX per month in child support. The written agreement indicates that the amount is open for review on XXXXXXXXXX annually. A court order dated
XXXXXXXXXX , requires that the father pay child support of $XXXXXXXXXX per month, net of tax, commencing XXXXXXXXXX . The court order also indicates that the child support shall be increased annually on XXXXXXXXXX of each year commencing in XXXXXXXXXX in accordance with s. 34(5) and 34(6) of the Family Law Act. Is the court order considered to be a court order made after April 1997?
Position:
Yes, the court order dated XXXXXXXXXX , is considered to be a court order made after April 1997 and paragraph (a) of the definition of “commencement day” in subsection 56.1(4) applies.
Reasons:
Paragraph (a) of the definition of “commencement day” in subsection 56.1(4) states that where an agreement or order is made after April 1997, the commencement day of the agreement or order is the day it is made. As the court order supersedes the pre-May 1997 written agreement, it is an order made after April 1997. In this particular case, subsections 56.1(3) and 60.1(3) do not apply. There is no indication from the wording of the court order that the written agreement is incorporated into the court order or that the payments made prior to the court order are deemed to be made pursuant to the court order.
October 14, 1998
Ottawa Taxation Centre HEADQUARTERS
Mona Melanson G. Moore
Unit 7.1 952-1506
T1 Client Services
7-982508
Child Support Payments - Definition of “Commencement Day” in Subsection 56.1(4)
We are writing in reply to your memo of September 25, 1998, in which you asked for our opinion concerning whether there is a commencement day (as defined in subsection 56.1(4) of the Income Tax Act (the “Act”)) for the court order XXXXXXXXXX.
As we understand the situation, a written agreement dated XXXXXXXXXX, between the above-mentioned individuals, indicates that $XXXXXXXXXX per month was to be paid XXXXXXXXXX for child support in respect of their two children and that the amount was open to review on XXXXXXXXXX. The court order dated XXXXXXXXXX, requires that XXXXXXXXXX pay child support of $XXXXXXXXXX per month, net of tax, to XXXXXXXXXX commencing XXXXXXXXXX In addition, the court order provides that the child support shall be increased annually on XXXXXXXXXX each year commencing in XXXXXXXXXX in accordance with sections 34(5) and (6) of the Ontario Family Law Act. Sections 34(5) and (6) of the Ontario Family Law Act provide that the court may provide that the amount payable under a court order shall be increased annually on the court order’s anniversary date by an (Consumer Price Index) index factor for indexing of support payments.
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. 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 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 order or agreement after a specified date (no earlier than May 1, 1997),
2. the parties change the child support amounts payable to the recipient by amending the agreement or court order after April 1997,
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 order or agreement specifically provides that the new tax rules will apply after a specific date (no earlier than May 1, 1997).
For a court order made after April 1997, the “commencement day” would be the day the court order is made. Whether we would regard the court order as having been made after April 1997 would generally depend on the legal relationship between the court order and the written agreement. Based on a review of the information you have submitted to us, since the court order supersedes the written agreement, it is our view that the court order would be regarded as being an order made after April 1997 and paragraph (a) of the definition of “commencement day” in subsection 56.1(4) of the Act applies to the court order. The commencement day of the court order is XXXXXXXXXX, and accordingly, the new child support rules apply to child support amounts payable or receivable, as the case may be, under the court order on or after its commencement day. Pursuant to paragraphs 56(1)(b) and 60(b) of the Act, the effect of this is that it eliminates both the requirement to include child support amounts receivable after the commencement day of the court order in XXXXXXXXXX income and the deduction available to XXXXXXXXXX for child support payable after the commencement day of the court order.
The child support amount payable of $XXXXXXXXXX per month pursuant to the court order has been varied from $XXXXXXXXXX per month payable pursuant to the written agreement. However, subparagraph (b)(ii) of the definition of “commencement day” in subsection 56.1(4) of the Act is not applicable in this situation because we do not consider that the written agreement was “varied” since the court order superseded the written agreement. It is our view that subparagraph (b) (iii) of the definition of “commencement day” in subsection 56.1(4) was intended to apply to situations where, for example, there is a pre-May 1997 court order requiring child support amounts payable of $XXXXXXXXXX per month and a post-April 1997 court order requiring child support amounts payable of an additional $XXXXXXXXXX per month.
For your information a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Legislation Access Database (LAD) on the Department’s mainframe computer. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, they can be provided with the LAD version or they may request a copy severed using the Privacy Act criteria which does not remove client identity. Requests for this latter version should be made by you to Jackie Page at 613 957-0682. The severed copy will be sent to you for delivery to the client.
We trust our reply will be of assistance in this matter.
J. Wilson
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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