SHARED CUSTODY OF A CHILD: The “Equal or Near Equal” Issue

SHARED CUSTODY OF A CHILD: The “Equal or Near Equal” Issue

Certain tax benefits, such as the Canada child benefit, the GST/HST rebate, and the recently implemented federal carbon tax incentive (where applicable) are normally paid entirely to the parent with whom the child primarily resides. Where the child resides with the parents on an equal or near equal basis, each parent is entitled to half of the credits/benefits which would be available if the child resided primarily with them.

A March 27, 2019 Federal Court of Appeal case addressed the proportion of time each parent is required to reside with the child in order to meet the “equal or near equal” condition. The Court noted that various lower court decisions consistently used “time” as a basis for determination. It also noted that, while the proportion of time residing with the child considered to be “equal or near equal” varied, it was never accepted below 40%.

While it noted that 40% is the legislated threshold for determining shared-custody status for Federal Child Support Guidelines (FCSG), the Court found that a determination of “equal or near equal” status for purposes of these benefits should be made without reference to the FCSG. The Court determined that the income tax definition required that the percentage of time with the child must be able to be rounded off to no less than 50%. Percentages should be rounded to the nearest whole number that is a multiple of 10. In other words, 44% would be rounded to 40% while 48% would be rounded to 50%. As a result, a minimum of 45% would be required to meet the income tax definition.

This is the highest Court to make a determination on this issue thus far, which means it is a binding precedent. While previous decisions commonly accepted a threshold of approximately 40%, this case clearly states that the minimum is 45%. As such, there is a 5% spread between the shared-custody definition for tax law (residing with the child on a near-equal basis) and the definition of a shared custody arrangement under the FCSG (which explicitly requires physical custody of the child at least 40% of the time). This means that, for example, a child who spends 42% of their time with one parent, and 58% with the other, would be shared custody for FCSG purposes, but the parent with whom the child spends 58% of their time could be entitled to 100% of benefits determined under the Income Tax Act.


ACTION ITEM: Be aware that eligibility for the Canada child benefit may change where the child is residing with one parent between 40% and 45% of the time. This change should also be considered in future separation agreements.


The preceding information is for educational purposes only. As it is impossible to include all situations, circumstances and exceptions in a newsletter such as this, a further review should be done by a qualified professional.

No individual or organization involved in either the preparation or distribution of this letter accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.

Marsha MacLean Professional Corporation