Ensuring the Availability of the Canada Child Benefit to Families in Shared Parenting Time Arrangements

The Government of Canada introduced the Canada Child Benefit (CCB) in 2016 to give low- and middle-income families more money each month, tax-free, to help with the cost of raising children. Compared to the old system of child benefits, the CCB is simpler, more generous and better targeted to those who need it most.

Nine out of 10 families get more under the CCB than they did under the old system of child benefits and, for the 2019-20 benefit year, families benefitting will receive on average around $7,000. The CCB provides support for over 6 million children every year.

To be eligible for the CCB in respect of a child, an individual must live with the child and be either the parent who primarily fulfills the responsibility for the care and upbringing of the child or be in a shared parenting time arrangement with respect to the child. (With the passage of Bill C-78, the Government is making changes to the terminology with respect to parenting after divorce. These changes will come into effect on July 1, 2020. Once these changes come into force, the Government intends to review the terminology used in the Income Tax Act to ensure consistency across federal legislation. The language used in this backgrounder—in particular, the reference to "shared-custody parent"—reflects the current terminology.)

For CCB purposes, a shared-custody parent is one of two parents who:

• are not at that time cohabitating spouses or common-law partners of each other;
• reside with the child on an equal or near equal basis; and
• primarily fulfill the responsibility for the care and upbringing of the child when residing with the child.

This definition is also applicable to the Goods and Services Tax/Harmonized Sales Tax (GST/HST) Credit amount provided for children, as well as a number of related provincial and territorial benefits and credits that are administered by the Canada Revenue Agency (CRA).

Two eligible individuals can receive CCB amounts in a particular month, and two eligible individuals can receive GST/HST Credit amounts in a particular quarter, if they are considered shared-custody parents. In those specific situations, these payments are equivalent to each eligible individual receiving one-half of the annual entitlement that they would receive if they were the sole eligible individual (i.e., if the child lived with them all of the time), paid in monthly installments over the year for the CCB and quarterly installments for the GST/HST Credit. 

The CRA has been interpreting "equal or near equal basis" as meaning that the child generally lives with the parent between 40% and 60% of the time. This is consistent with the concept of shared custody in the Federal Child Support Guidelines, as well as in provincial and territorial child support guidelines. For example, the CRA would generally consider to be eligible cases where the child lives on a more or less equal basis:

• with one parent four days a week and the other parent three days a week;
• with one parent one week and the other parent the following week; or
• with each parent in any other regular cycle of alternation.

Recent Federal Court of Appeal Decisions

Two recent Federal Court of Appeal (FCA) decisions determined a narrower interpretation of "equal or near equal basis" than the CRA's current administrative practice.

In a March 27, 2019 decision, the Court determined in Morrissey v. The Queen (2019 FCA 56) that the parents did not reside with the child on a "near equal basis", as the percentage of time that one parent resided with the child was less than 45%. According to the decision, any percentage that cannot be rounded off to 50% would not qualify as near equal. As a result, the Court found that "near equal" should be interpreted as residing with the child between 45% and 55% of the time. In reaching this decision, the Court adopted the reasoning from another FCA case (Lavrinenko v. The Queen) that was released on the same day as the Morrissey decision and that dealt with an identical issue.

Proposed Legislation Would Clarify Intended Definition of Shared-Custody Parent

In order to minimize disruption for families, the Government will propose an amendment to the Income Tax Act to clarify the definition of a shared-custody parent, which would allow the CRA the flexibility to continue to recognize these arrangements in the same manner as thus far. In addition, consistency with federal and provincial child support guidelines will be maintained.

Under the proposed amendment, a shared-custody parent would be defined as one of two parents who:

• are not at that time cohabitating spouses or common-law partners of each other;
• reside with the child either at least 40% of the time in a month or on an equal or approximately equal basis; and
• primarily fulfill the responsibility for the care and upbringing of the child when residing with the child.

These rules would ensure that the CRA's current administrative practice is supported in law. Families currently receiving benefits under the shared-custody parent provision would see no change to their benefit payments as a result of this clarification.

This amendment is proposed to apply to benefit payments after June 2011, which is the date that the original shared-custody parent provision came into effect.

The Government intends, at an early opportunity, to introduce in Parliament a legislative proposal that would implement this amendment.