Chapter History S1-F3-C3, Support Payments

Introduction

The purpose of a Chapter History page is to highlight any amendments to the information contained in a chapter of an income tax folio, including amendments to the information originally contained in an interpretation bulletin that has been cancelled and replaced with a folio chapter. It outlines amendments that have been made as a result of legislative changes and proposed legislative changes, precedential court decisions, as well as new or revised interpretations of the Canada Revenue Agency (CRA).

Except as otherwise noted, all statutory references herein are references to provisions of the Income Tax Act, R.S.C., 1985, c.1 (5th Supp.), as amended and all references to a Regulation are to the Income Tax Regulations, C.R.C., c. 945, as amended.

Update May 16, 2019

¶3.28 has been updated to revise the sentence stating that an agreement deemed by a court to be a court order for purposes of provincial maintenance enforcement is not an order for purposes of support amounts in the Act. This revision reflects that the CRA administratively accepts that a provincial maintenance enforcement agreement constitutes an order as required by the definition of support amount in subsection 56.1(4).

¶3.67 and 3.73 have been revised to refer to the publications of Income Tax Folio S1-F4-C1, Basic Personal and Dependant Tax Credits (for 2016 and previous tax years), which replaced and cancelled Interpretation Bulletin IT513R, Personal Tax Credits, and Income Tax Folio S1-F4-C2, Basic Personal and Dependant Tax Credits (for 2017 and subsequent tax years), which updates Income Tax Folio S1-F4-C1.

¶3.75 has been revised to update the reference to the child tax credit to the Canada caregiver tax credit (child). This legislative amendment was made by S.C. 2017, c.20, s.12 (formerly Bill C-44), effective for the 2017 and subsequent tax years.

¶3.76 has been revised to clarify that a legal obligation exists for the purpose of the eligible dependant tax credit.

In addition, minor revisions have been made to the French version of the Chapter for readability and consistency purposes.

Update November 24, 2015

Minor changes have been made to improve the usability of the income tax folios:

• the Summary section has been moved to the top of each folio chapter to be more immediately visible and helpful to readers;
• the Application and Reference sections have been moved to the end of the Chapter which is more appropriate for administrative content of this nature. However, these sections now appear in the Table of contents for easy access;
• the statement that folios are only available in electronic format has been moved to the end of the Application section; and
• the words “as promulgated under the Act” in connection with the Income Tax Regulations have been removed from the Application section, in the interest of using plain language.

Update March 5, 2015

No technical changes were made to the Chapter but several minor revisions have been made to the August 19, 2014 version of the Chapter History. Specifically, the following entries in the Chapter History have been updated as follows:

¶3.6 entry is amended to change the legislative reference from c. 33 to c. 34.

¶3.21, 3.23 and 3.25 entries are each amended for readability by deleting the words “reproduces parts of former ¶7” after the parenthetical comment, “(formerly contained in ¶7 of IT-530R).”

¶3.67 and ¶3.78 to 3.82 entries are amended to specifically identify that succession is a civil law concept. The Chapter History comments at these paragraphs are also revised to confirm that the amended definition of estate in subsection 248(1) came into force on December 12, 2013.

Update August 19, 2014

General

S1-F3-C3, Support Payments, replaces and cancels Interpretation Bulletin IT–530R, Support Payments concerning the taxation of support payments made for the maintenance of a child, spouse or common-law partner or former spouse or common-law partner under a court order or written agreement. It also incorporates the information contained in Income Tax Technical News No. 24.

In addition to consolidating the content of the former interpretation bulletin and the ITTN, general revisions have been made to improve readability. Any substantive technical and interpretive changes to the information outlined in the former interpretation bulletin are described below.

Legislative and other changes

Throughout the Chapter, all references to spouse have been changed to spouse or common-law partner based on the 2000 same-sex partner bill.

¶3.1 has been added as an introduction to support payments.

¶3.2 (formerly ¶2 of IT-530R) has been updated in recognition that in most cases, support payments for the maintenance of the children of the recipient are not deductible with a proviso that it could still be deductible in very specific situations.

¶3.3 (formerly ¶3 of IT-530R) has been modified to refer readers to new ¶3.66 which discusses support payments to or from a non-resident.

¶3.4 has been added to clarify the meaning of child. Former ¶1 of IT-530R, which referred to natural parent, has been updated to reflect the extended meaning of child in subsection 252(1).

¶3.5 (formerly contained in ¶12 of IT-530R) has eliminated the previous commentary in ¶12 of IT-530R which dealt with the extended meaning of the term spouse as it pertained to persons of the opposite sex for the purposes of the 1993 to 2000 tax years in subsection 252(4).

¶3.6 (formerly contained in ¶12 of IT-530R) has been revised to reflect the amendment to the definition of common-law partner in 248(1). This provision was amended by 2013, c. 34, s. 358(1), applicable to the 2001 and subsequent taxation years.

¶3.7 to 3.9 have been added to discuss the concepts of separation and living separate and apart.

¶3.12 has been added to discuss the concept of spousal support.

¶3.15 to 3.16 have been added to discuss issues relating to income inclusion by the recipient under paragraph 56(1)(b).

¶3.17 (formerly ¶14 of IT-530R) has modified the wording for element B of the formula to parallel the wording in 60(b).

¶3.18 (formerly ¶16 of IT-530R) has been expanded to clarify that the priority of child support applies on a case-by-case basis as explained in ¶3.35.

¶3.19 (formerly ¶34 of IT-530R) has been expanded to clarify that paragraphs 56(1)(c.2) and 60(c.2) do not apply to reimbursements made under a written agreement.

¶3.20 has been added to discuss the alternatives available in the year of a change in marital status.

¶3.21 (formerly contained in ¶7 of IT-530R) has been modified with respect to the date of a court order and expanded to explain the relevance of the term commencement day for the purposes of paragraph 56(1)(b).

¶3.22 (formerly ¶15 of IT-530R) has been modified and expanded to discuss issues relating to income inclusion by the recipient under paragraph 56(1)(b).

¶3.23 (formerly contained in ¶7 of IT-530R) has been expanded to discuss the relevance of the deeming provisions for certain voluntary payments made before the date of a court order or written agreement for the purposes of subsection 56.1(3).

¶3.25 (formerly contained in ¶7 of IT-530R) has been expanded to clarify that where an order or agreement made before May 1997 changes only a spousal support amount payable, that change in spousal support will not trigger a commencement day under either subparagraph (b)(ii) or (iii) of the definition of commencement day.

¶3.31 has been added to discuss issues relating to a written agreement where the parties exchange electronic correspondence.

¶3.32 has been added to provide information dealing with the priority of a court order over a written agreement.

¶3.33 has been added to provide a clear statement that the tax treatment of support amounts will be based solely on the requirements provided for in the Act.

¶3.35 (formerly ¶18 of IT-530R) has been modified to emphasize the requirement for a court order or written agreement and also that the amount deductible under paragraph 60(b) is the total of all amounts determined by the formula in paragraph 60(b) after giving consideration to support amounts paid to a particular person.

¶3.40 (formerly ¶10 of IT-530R) has been modified to expand the discussion of adjusting support amounts where the court order or written agreement gives consideration to bonuses and incentive payments.

¶3.42 has been added to address circumstances similar to former ¶11 where a support amount is offset by an equalization amount owed by the recipient to the payer.

¶3.44 (formerly contained in ¶22 of IT-530R) has been has been changed to note the CRA’s general acceptance of the Tax Court of Canada decision in Craig James v HMTQ, 2013 TCC 164, 2013 DTC 1135 for a lump-sum payment for retroactive periodic maintenance paid pursuant to a court order.

¶3.45 (formerly contained in ¶22 of IT-530R) has been expanded to clarify that where a lump-sum amount meets the requirements of a support amount, it is deductible by the payer and included in the income of the recipient. New content has been added to explain the availability of a special tax calculation for the recipient.

¶3.46 (formerly contained in ¶22 of IT-530R) has been changed to note the CRA’s general acceptance of the Tax Court of Canada decision in Craig James v HMTQ, 2013 TCC 164, 2013 DTC 1135 for a lump-sum payment for retroactive periodic maintenance paid pursuant to a court order as explained in ¶3.44.

¶3.48 (formerly ¶20 of IT-530R) have been expanded to describe potential exceptions relating to the discretion requirement where amounts are paid to another party. Content relating to the Supreme Court of Canada decision in Jean Paul Gagnon v The Queen, [1986] 1 SCR 264, 86 DTC 6179, which addressed the issue of deductibility for certain amounts payable under court orders or written agreements made after March 27, 1986 and before 1988 has been deleted.

¶3.49 has been added to include discussion of special and extraordinary expenses as provided in section 7 of the Federal Child Support Guidelines.

¶3.50 has been added to emphasize that payments to third parties for the benefit of a person must be made pursuant to a court order or written agreement.

¶3.51 has been added to identify the connection between payments to third parties under a court order or written agreement, requirements for deductibility by the payer and the parallel income inclusion by the recipient.

¶3.53 (formerly contained in ¶26 of IT-530R) has been revised to clarify that the recipient must have the ability to redirect third party payments under subsection 60.1(1).

¶3.57 (formerly contained in ¶29 of IT-530R) has been modified to improve clarity about application to the payer and recipient.

¶3.59 (formerly contained in ¶29 of IT-530R) has been revised to reflect the amendment to add a reference to corporeal property in subsections 56.1(2) and 60.1(2). These provisions were amended by 2013, c. 34, s. 108 and 109. The amendment is effective on the date of Royal Assent, which was June 26, 2013.

¶3.60 (formerly contained in ¶30 of IT-530R) has been modified to improve clarity about application to the payer and recipient.

¶3.62 (formerly ¶28 of IT-530R) has been expanded to make reference to payments to a provincial authority.

¶3.64 has been added to discuss circumstances where a court order or written agreement requires a payment of spousal support plus an additional amount of income taxes that are attributable to the spousal support.

¶3.65 has been added to discuss the taxation of any arrears interest attributable to a court order or agreement.

¶3.66 has been added to discuss support payments to or from a non-resident.

¶3.67 (formerly ¶36 of IT-530R) has been modified to include a reference to the civil law concept of succession in recognition of the amended definition of estate in subsection 248(1) (as amended by 2013, c.40, s.89(2), in force on December 12, 2013. The paragraph has also been modified to clarify that the payer may be entitled to personal tax credits after the death of the recipient.

¶3.68 has been added to discuss the treatment of payments directly from a pension plan to the recipient and includes a reference to paragraph 11 of Interpretation Bulletin IT-499R, Superannuation or Pension Benefits.

¶3.73 has been added to refer readers to Interpretation Bulletin IT-513, Personal Tax Credits.

¶3.74 (formerly ¶35 of IT-530R) has been modified to note that the restriction in subsection 118(5) is applied in respect of a particular person as well as giving consideration to amounts paid to third parties.

¶3.75 to 3.76 have been added to include discussion of the exception in subsection 118(5.1) for claiming a personal tax credit in respect of a person where more than one individual is required to make a child support payment in respect of that person. This provision was amended by 2007, c. 35, s. 36(2), applicable to the 2007 and subsequent tax years.

¶3.78 to 3.82 (formerly contained in ¶17, 18, 20 and 21 of IT-99R5 and Income Tax Technical News No. 24) have been added to explain the types of deductible and non-deductible legal and accounting fees as outlined in ITTN No. 24. As well, paragraph 3.79 is amended to include a reference to the civil law concept of succession, in recognition of the amended definition of estate in subsection 248(1) (as amended by 2013, c.40, s.89(2), in force on December 12, 2013).

¶3.83 (formerly contained in ¶19 of IT-99R5) has been added to provide additional commentary on deductibility of legal fees incurred by the recipient where the claim was unsuccessful.

¶3.84 has been added to provide additional commentary on deductibility and recovery of legal fees.

¶3.85 has been added to include a reference to Income Tax Folio S1-F3-C1, Child Care Expense Deduction.