Tax Court of Canada


Income Tax

Tax credits

Separation agreement creating two obligations not just means of calculating support

Taxpayer and ex-wife signed child support agreement in 2012, stating that in transition period, taxpayer would pay ex-wife $600 per month for two children. They further agreed that when children started spending equal or almost equal amounts of time at their two residences, taxpayer, as having greater income, would pay wife $100 per month. This amount was in accordance with applicable Federal Child Support Guidelines. Parties also agreed that for tax claims and deductions, they would be split as follows: wife would claim expenses in even numbered years and taxpayer in odd numbered years. Minister issued reassessment for 2013 taxation year, denying taxpayer wholly dependent person credit pursuant to s. 118(1)(b) of Income Tax Act, and child amount credit pursuant to s. 118(1)(b.1) of Act. Taxpayer alleged separation agreement was to be interpreted as requiring both he and his ex-wife to pay supports amounts; and that Canada Revenue Agency (CRA) violated his rights under s. 8 of Canadian Charter of Rights and Freedoms by demanding entire separation agreement, when they only needed relevant sections, thus invading his right to privacy. Taxpayer appealed. Appeal allowed. Appeal allowed on basis there were two requirements to pay pursuant to their written separation agreement, which brought into effect s. 118(5.1) of Act and allowed taxpayer to claim credits. There was no violation of s. 8 of Charter. Another couple could make no reference to Guidelines but one was required to pay $400 and other to pay $300 and conclude with one payment of $100 only being required, and get credits. This was problematic, but was not Charter issue. In demanding document upon which Act itself stipulated credits were based, coincidentally advising taxpayer such information would be kept confidential, CRA recognized delicate balance between state interest and privacy rights. Where separated couple relied on CRA commentary suggesting there could be one cheque for convenience sake, where couple drafted their agreement with intention to create mutual requirements to pay, where net payment was not based solely on Guidelines but represented obligation of one side to make payments towards travel expenses of other and where subsequent written agreement was accepted by CRA while not altering prior agree-upon agreement, Court was prepared to interpret separation agreement as creating two obligations and not simply means of calculating one support payment.

Lawson v. The Queen (2017), 2017 CarswellNat 3198, 2017 TCC 131, Campbell J. Miller J. (T.C.C. [Informal Procedure]).


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