Effective July 1, 2016, the new Canada Child Benefit (the “Child Benefit”) will come into effect, replacing the previous Canada Child Tax Benefit and Universal Child Care Benefit. Canada Revenue Agency (“CRA”) has stated that the last payment under the “old system” will be made on June 20, 2016, with payments for the new Child Benefit system starting on July 20, 2016. The Child Benefit formed part of Budget 2016 tabled by the Liberal Government aimed at simplifying and consolidating the existing child benefit system. The purpose of this blog post is to touch on some key items associated with the Child Benefit.

Am I Eligible?

You are eligible for the Child Benefit if:

• you are a resident of Canada;
• you reside with a “qualified dependent” (generally speaking, a child of yours); and
• you are the parent who primarily fulfills the responsibility for the care and upbringing of that “qualified dependent” or you are a shared-custody parent.

In the case of separated parents, the determination of which parent is entitled to the Child Benefit can get complex. A few general points can be made on this:

• CRA is under no obligation to honour agreements between the parents as to who gets the Child Benefit (albeit they have, in some instances under the “old system”, allowed the parents to split the child benefits equally in a situation where the child spends 6 months with Parent A and 6 months with Parent B)
• There is a general presumption that the “primary caregiver” of a child is the female parent. However, this can be disproven and will not be the case where the female parent declares (in writing) to CRA that the male parent is the “primary caregiver” of the child
• In situations where it is unclear who the “primary caregiver” is, CRA will look to the following factors:
  • The supervision and daily activities and needs of the child;
  • The maintenance of a secure environment in which the child resides;
  • The arrangement of, and transportation to, medical care at regular intervals and as required for the child;
  • The arrangement of, participation in, and transportation to, educational, recreational, athletic or similar activities in respect of the child;
  • The attendance to the needs of the child when the child is ill;
  • The attendance to the hygienic needs of the child on a regular basis;
  • The provision, generally, of guidance and companionship to the child; and
  • The existence of a court order in respect of the child that is valid in the jurisdiction where the child resides.

The key takeaway here is that, in situations where parents are separated, the calculation and claiming of the Child Benefit can be complex. Consequently, professional advice should be sought from both tax and family law lawyers.

How Much Will I Get?

The amount you may receive as part of the Child Benefit is based on two (2) factors: the number and ages of the children in your care; and your adjusted family net income. There is a maximum annual payment of $6,400 for each child under the age of 6 and a maximum of $5,400 for each child aged 6 through 17. Generally speaking, a family with less than $30,000 in adjusted family net income will get the maximum benefit. As the family income increases over $30,000, the Child Benefit will be gradually reduced until it reaches 0. Thankfully, for the less mathematically-inclined of us, the Government of Canada has set up a web page with a simple calculator which can help approximate the amount of your entitlement under the new Child Benefit (see here: http://www.budget.gc.ca/2016/tool-outil/ccb-ace-en.html). For a more detailed calculation, the CRA has a calculator on their website as well (see here: http://www.cra-arc.gc.ca/bnfts/clcltr/cfbc-eng.html). However, as of the date of this blog post, it does not appear that the CRA’s calculator has been updated for the new Child Benefit. If one of your children has a severe disability, you should also know that the Child Benefit system does not do away with the existing disability tax credit. Rather, you can still potentially receive up to $2,730 per year per disabled child. However, the child disability amount is also subject to the same “phasing out” as the Child Benefit. This means that if your adjusted family net income is in excess of $30,000, the disability amount will be gradually reduced as family income rises. As a final (no doubt important) comment, the Child Benefit is not taxable and will not reduce benefits paid under the Goods and Services Tax credit. Further, the Child Benefit is not included in income for the purposes of federal income-tested programs such as (i) the Guaranteed Income Supplement, (ii) the Canada education savings grant, (iii) the Canada learning bond, (iv) the Canada disability savings bond, and (iv) the Canada disability savings grant.

How Do I Apply?

If you are already receiving the old Canada Child Tax Benefit or the Universal Child Care Benefit (or both), you do not have to apply for the Child Benefit. However, you and your spouse (if any) will need to file a 2015 income tax and benefit return even if you did not have any income in 2015. This is because your first payments (in potentially July of 2016) will be based on your 2015 net family income. If you are not currently getting the “old world benefits”, you can apply for the Child Benefit in several ways, which are listed on the following CRA website under the heading “How will you apply?”: http://www.cra-arc.gc.ca/bnfts/ccb/menu-eng.html

About the author:

Joe is an associate in the Saskatoon office where he practices in the areas of corporate finance, securities, mergers & acquisitions, and taxation.

About McKercher LLP:

McKercher LLP is one of Saskatchewan’s oldest, largest law firms with offices in Saskatoon and Regina. Our deep roots and client-first philosophy have made us a top ranked firm by Canadian Lawyer magazine (2011, 2013). Innovation, experience and capacity provide innovative solutions for our clients’ diverse legal issues and complex business transactions. This post is for information purposes only and should not be taken as legal opinions on any specific facts or circumstances.  Counsel should be consulted concerning your own situation and any specific legal questions you may have.