D. Subsidies, Tax Deductions or Credits

• Author: Julien D. Payne - Marilyn A. Payne
• Pages: 261-264

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See note ¹⁴²

In determining the amount of an expense under section 7(1) of the Federal Child Support Guidelines, the court must take into account any subsidies, benefits or income tax deductions or credits relating to the expense and any eligibility to claim a subsidy, benefit or income tax deduction or credit relating to the expense.¹⁴³Sections 118.5 and 118.6 of the

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Income Tax Act provide for a tuition, education, and textbook tax credit which may be claimed in the appropriate circumstance. Pursuant to section 7(3) of the Guidelines, this tax credit must be taken into account in respect of an order for payment of section 7 expenses.¹⁴⁴For the purpose of determining the reasonableness of section 7 expenses and in apportioning such expenses between the parents, the Universal Child Care Benefit paid for a child in respect of whom section 7 expenses are ordered must be taken into account.¹⁴⁵ The word "benefits" in section 7(3) of the Guidelines is much wider in its ordinary meaning than are the words "subsidies" and "income tax deductions or credits." However, the ejusdem generis rule of statutory interpretation may be appropriately applied to confine the meaning of "benefits" to a net transfer of resources made without any expectation of repayment. Insofar as a student loan presupposes repayment, it does not constitute a benefit to be automatically taken into account under section 7(3) of the Guidelines.¹⁴⁶Before apportioning special or extraordinary expenses between the parties under section 7 of the Guidelines, the court should deduct any contribution that has been made to those expenses by family relatives or community groups.¹⁴⁷An order for a contribution to the expenses of a special needs child may be granted under section 7 of the Ontario Child Support Guidelines where provincial financial aid is insufficient to cover all reasonable needs of the child.¹⁴⁸Section 7(3) of the Guidelines is expressed in mandatory language that requires the court to take relevant tax considerations into account in determining the amount of an expense under section 7(1) of the Guidelines.¹⁴⁹Eligibility for income tax relief must be considered for the purpose of assessing expenses under section 7 of the Federal Child Support Guidelines, even if such relief is not actually sought by the recipient spouse.¹⁵⁰Judicial notice has been taken of a spouse’s entitlement to income tax relief with respect to child care expenses.¹⁵¹Although the court must take into account the tax consequences associated with the expense, it may be impossible to determine their implications until the end of the taxation year. In that event, the court can at best only estimate the tax impact of the expenses and calculate the proportionate share of each spouse on the basis of the estimated net cost of the expense.¹⁵²One way of ensuring a fair proportionate sharing of the expenses

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is to direct each parent to pay his or her proportionate share of the expenses when they fall due and to later share in the tax benefit on the same proportionate basis, when it is ascertained.¹⁵³In order to accommodate this result, the court may direct the parties to exchange their income tax returns within a specified time after filing, with leave being granted to return to the court, if agreement cannot be reached after the exchange of the income tax information.¹⁵⁴A court may refuse to allow income tax calculations respecting child care expenses to be deferred until the end of the taxation year because of the difficult or highly conflictual relationship between the spouses.¹⁵⁵The failure of the custodial parent to obtain receipts for child care expenses does not preclude a claim for a contribution to these expenses by the non-custodial parent under section 7 of the Federal Child Support Guidelines, nor does the absence of receipts signify that no allowance will be made under section 7(3) of the Guidelines for any income tax saving which might have accrued to the custodial parent if properly claimed. A court is entitled to accept a stipulated amount as an estimate that is permitted under the November 2000 amendments to the Federal Child Support Guidelines.¹⁵⁶The net after-tax cost of child care expenses under section 7(1) of the Federal Child Support Guidelines must be calculated on the basis that any tax deductions or credits available to the recipient spouse independently of the children for whom support is being sought should be disregarded in making the calculation; the payor is not...