In April, 2019, the Ontario government introduced the Childcare Access and Relief from Expenses (CARE) tax credit, which provides tax savings to parents incurring childcare expenses that fall within section 7 of the Child Support Guidelines. These savings are in addition to the existing Child Care Expense Deduction (CCED) and the federal childcare tax relief. Despite the cost-savings intention of the CARE credit, in many family law cases, the credit can have unintended results. The parent paying for childcare will see their benefits increased and taxes reduced, sometimes to the point where the overall impact is more than the actual costs incurred for the childcare, resulting in a “surplus” for that parent. This means that parents may actually have to make a payment to the other parent in order to share the childcare surplus.
It’s at this point that you may be wondering what types of expenses qualify under section 7 of the Child Support Guidelines.
Special or extraordinary expenses, otherwise known as “section 7” expenses, are additional expenses not covered in the table amount for child support (which is a basic monthly amount of child support). Some common examples of section 7 expenses from the Child Support Guidelines include:
- child care expenses that are be the result of the custodial parent’s employment, illness, disability, education or training for employment, including before and after school care, and babysitting;
- expenses for primary school, secondary school or for any other educational programs, such as private school and tutoring;
- post-secondary education expenses;
- health-related expenses, including orthodontics, professional counselling, speech therapy and glasses; and
- expenses for extracurricular activities, such as swimming lessons, music lessons, summer camp, sports lessons, etc.
The full exhaustive list of special or extraordinary expenses is set out in paragraphs 7(1)(a) to (f) of the Child Support Guidelines. In many cases the answer is not clear: it is always a good idea to consult with a lawyer if you are unsure.
Once a special or extraordinary expense is found to fit within the prescribed list provided in section 7, it needs to be determined whether the expense is necessary and reasonable. This examination requires taking into account the reasonableness of the expense, the child support table amount being paid, the parties’ incomes, the special needs or abilities of the child, and any other relevant factors.
The parent who is seeking the contribution or payment for the expense has the onus to prove that the expense is in fact a special or extraordinary expense as prescribed within section 7.
Now that we’ve established what expenses may qualify under section 7, let’s get back to the new CARE credit. Whether you are dealing with the CARE credit in the context of a separation agreement or a court order, there should be consideration given to the pros and cons of requiring a section 7 payment from one parent to the other parent in situations where there is a surplus. In addition, another consideration in navigating the surplus is the direct impact child support has on the amount of spousal support that may be payable. Government benefits and credits for children are included as income in “with child support” spousal support calculations and reduce the need for spousal support for lower income parents.
Each approach as to how to deal with the CARE credit and the resulting surplus will depend on your individual situation. At Wood Gold LLP, our lawyers have significant experience dealing with all types of child support issues, including how to deal with the new CARE credit. We can help you find a solution that maximizes the money available to your family and focuses on the bottom line. Complete an intake form and contact us today for a free 30-minute consultation.