Alison Boyce tweeted today about an interesting article published recently in The National magazine. The article describes CBA efforts to convince the Department of Finance that it needs to re-visit the tax rules affecting shared parenting.
The article refers to Harder v R, 2016 TCC 197 (informal procedure), which illustrates one particular absurdity with the current rules. For a parent who pays support to claim a child tax credit, he or she must come within the exception to subsection 118(5) provided by subsection 118(5.1) of the Income Tax Act (Canada). The subsections read as follows:
(5) No amount may be deducted under subsection (1) in computing an individual’s tax payable under this Part for a taxation year in respect of a person where the individual is required to pay a support amount (within the meaning assigned by subsection 56.1(4)) to the individual’s spouse or common-law partner or former spouse or common-law partner in respect of the person and the individual
(a) lives separate and apart from the spouse or common-law partner or former spouse or common-law partner throughout the year because of the breakdown of their marriage or common-law partnership; or
(b) claims a deduction for the year because of section 60 in respect of a support amount paid to the spouse or common-law partner or former spouse or common-law partner.
(5.1) Where, if this Act were read without reference to this subsection, solely because of the application of subsection (5), no individual is entitled to a deduction under paragraph (b) or (b.1) of the description of B in subsection (1) for a taxation year in respect of a child, subsection (5) shall not apply in respect of that child for that taxation year.
The exception in subsection (5.1) can apply where both parents pay support to each other (in a shared parenting arrangement) because subsection (5) will apply to both parents to deny the deduction. Unfortunately, parents often do the sensible thing and, rather than cut cheques to each other, the parent owing the higher amount simply pays the difference to the other.
Mr Justice Bocock, in Harder, pointed out that income tax isn’t about being sensible:
 All of these decisions or situations involve a mandatory requirement for each parent to pay an amount reflected in a court order or formal agreement marching along with conclusive evidence of actual payment being made. It does not include the expeditious use of a computer software programme, the culmination of which is a unilateral payment of a support amount by only one parent to the other.
 The practising family law Bar should take note. The engagement of the combined effect of subsections 118(5) and 118(5.1), at a minimum, requires a comprehensive documentary and evidentiary record. If separating spouses, seeking joint custody, wish to avail themselves of a dependent deduction for both spouses in such situations, surely family law lawyers can deploy their usual flexible skills to ignore the set off provisions within the paradoxically named “Divorce Mate” for a brief moment and mandate and effect actual periodic payments by both spouses to each other in cases of shared parenting of two or more children. Surely cheques, or even their more modern replacement of recurring e-transfers, may evidence a clearly enumerated, reciprocal and mandatory support amount paid by each spouse to the other.