Canada Revenue Agency and the Canada Child Tax Benefit and GST in Shared Custody Situations
Canada Revenue Agency Has Made Critical Changes To the CCTB and GST in Shared Custody Situations...Contino Says "Watch Out!"
1. What exactly is the policy change?
Canada Child Tax Benefit (CCTB) legislation only allows eligibility to one "eligible individual" in a month. Situations exist where a child lives more or less equally with two individuals (whether 4 days with one, and 3 days with the other, on a one week on, one week off basis or some other similar rotation), and each individual is primarily responsible for the child's care and upbringing when the child resides with them. To address this problem, the Canada Revenue Agency (CRA) developed a shared eligibility policy that would recognize that there could be two eligible individuals for the same child. It was therefore decided to allow eligibility for the child (or children) to each individual on a 6-month on, 6-month off rotation, both for the CCTB and for the child component of the goods and services/harmonized sales tax (GST/HST) credit. Although alternatives were not offered to clients, they could request and were to be allowed any of the following options:
- Where there were two or more children, eligibility for the CCTB and the child component of the GST/HST credit to one individual for one or more children, and eligibility for the CCTB and the child component of the GST/HST credit to the other individual for the remaining child or children;
- Eligibility for the CCTB and the child component of the GST/HST credit to one individual only.
- Eligibility for the CCTB to one individual and eligibility for the child component of the GST/HST credit to the other individual.
The CRA recently decided that the above alternatives would no longer be allowed. Clients in a shared eligibility situation will have their eligibility to benefits rotated between them only on a six-month on, six-month off basis.
2. What is the reason for the policy change?
The CRA has decided that it should have a policy that applies in all situations to all benefit clients. Benefit eligibility should "follow the child." This means that if a child resides with two different individuals on a more or less equal basis, and each of these individuals are primarily responsible for that child's care and upbringing during the period when the child resides with them, then both individuals should be eligible for benefits.
3. Why is eligibility rotated on a six-month basis? My children live with me for one week, and with another individual for one week.
Legislation prevents the CRA from having two eligible individuals for the same child in the same month. At this time, for administrative reasons, the CRA is not able to rotate the eligibility month by month; therefore a six-month cycle has been established.
4. I am in a shared eligibility situation, and have made an arrangement with the other person that I will receive the CCTB and GSTC. We have told the CRA about this arrangement in he past. What will happen now?
There are no plans to look for all the individuals in your situation; however, if CRA officials do come across a situation such as yours in the course of conducting their normal activities, or if you happen to self-identify, the individuals involved will be put into a six-month rotation of benefit eligibility.
5. I have recently separated from my ex-spouse and because my family income is much lower, I would receive a greater amount of benefits if I were the sole recipient. Why is this no longer possible?
By letting individuals pick and choose who between them will be the eligible individual, the CRA is not being fair to all of its other benefit clients. If a child lived with one individual only, that individual would be the eligible individual (assuming all of the other eligibility criteria have been met) without regard to that person's family income. If a child resides with two individuals, and they are both responsible for that child's care and upbringing, it is most fair and equitable if both share benefit eligibility for that child, regardless of the amount of the benefit, if any, that each will receive. It is entirely possible in a situation of shared eligibility, that one individual will receive no benefits at all during their six-month rotation, due to their high family income.
6. I am in a shared eligibility situation, but I have a court order that states that I am to receive the CCTB. How can the CRA overrule a decision made by the court?
The CRA is not obligated to respect these court decisions, as the only legal authority for determining benefit eligibility is the Income Tax Act-specifically the definition of "eligible individual." The existence of a court order or agreement may be one of the factors used in determining with which parent a child or children may reside, but its provisions do not determine who is eligible for the CCTB and the child component of the GSTIHST credit. Part of the communication strategy for this policy change is to ensure that the legal community is made aware that benefit eligibility is determined according to the Income Tax Act, and not by the courts.
7. I am now in a shared eligibility situation. How should I inform the CRA of this?
In these situations, there is usually already an eligible individual for the child. The other individual should therefore submit a CCTB application (which is also a GST/HST credit child registration form), as soon as possible after the shared eligibility situation begins; with a note or letter attached that explains the living arrangement. If the new application also includes the signatures of both individuals, this will speed up the processing. The new applicant will be put into eligibility for a six-month period as of the current date. The CRA will send letters of explanation to both the new applicant and the current recipient. After the new applicant's six-month rotation is finished, the other individual will receive benefit eligibility for the next six months. This rotation will continue until the situation changes, or until the child's 16th birthday (for CCTB) or 19th birthday (for the GST/HST credit), whichever comes first. It is not necessary to re-apply every six months.
8. My shared eligibility situation began over a year ago. Is the 6-month rotation retroactive?
In cases where the other person involved in the shared eligibility situation was already eligible, the CRA will not remove that person's eligibility retroactively in order to establish eligibility for the new applicant. Clients have the responsibility to report any changes in the child's residence and custody/care situation promptly.
9. If I have further questions about the policy change, where else can I get information?
You may call our CCTB enquiries personnel at 1-800-387-1193 or our GST/HST credit enquiries personnel at 1-800-959-1953, or visit our website.
January 22, 2006
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