Since July, 2016, families with children have been eligible to receive a tax-free benefit from the Federal government called the Canada Child Benefit. This replaced the previous Canada Child Tax Benefit and Universal Child Care Benefit with a single, non-taxable benefit for all families with children, geared to the income of the parents.
The Canada Child Benefit may include a child disability benefit to parents of children eligible for that benefit. General information is available on CRA’s web page.
While a couple is together, the Canada Revenue Agency will look at the whole family’s income to determine the appropriate benefit amount payable. The benefit amount must be paid to only one parent (CRA’s policy is that it be paid to the female parent unless the male parent provides specific information confirming he is the primary parent), although it can be paid via direct deposit into a joint bank account.
When parties separate they have an obligation to inform CRA, which can be done online, by phone or by filling out the required forms. This should be done before the parties simply file their taxes and check off a different marital status on their respective returns.
If one of the parents has primary care and control of the children that parent will be entitled to the full Canada Child Benefit that he or she would otherwise be entitled to as the only caregiver – the other parent’s income is not considered. If the parties share care and control of the children each parent will be eligible to receive half of the amount to which he or she would be entitled as the only caregiver.
Because the Canada Child Benefit is geared to income, this means that a lower-earning spouse will be entitled to a greater benefit each month than the higher-earning spouse, but in any case only 50% of the benefit to which that spouse would be entitled.
Where a separated parent re-partners with someone new, there is an obligation to inform the CRA so that they can determine if your benefit amount is still appropriate. If the new partner works, the benefit amount will be reduced.
Your Separation Agreement should specify which party will be claiming the Canada Child Benefit, as well as the other credits or benefits to which either or both party may be entitled. If there is no agreement in place CRA will send you a questionnaire to which you are required to reply with any supporting documents requested.
If you would like further information about your entitlement, tax benefits and credits generally, or how to ensure your Agreement properly addresses these issues, please contact Mann Lawyers.