Where marriage breakdown occurs, including the breakdown of a common-law relationship or a common-law partnership, a payment constitutes a support amount and is deductible if all the following criteria are met:
- the amount must be paid under an order of a competent tribunal or under a written agreement; however, please note that a court order or written agreement can validate earlier payments of the year and the preceding year;
- the amount must be payable or receivable as an allowance on a periodic basis (for 1996 and earlier years read “the payment must be in the nature of alimony or other allowance payable
- on a periodic basis”); however, please note that a subsequent court order or written agreement can validate as periodic specified expenses which may in fact be contingent or occasional;
- the amount must be for the maintenance of the recipient, the children of the recipient, or both;
- the taxpayer must be living apart from the recipient at the time of the payment because of the breakdown of their marriage;
- the recipient has discretion as to the use of the amount; in either form, the issue is whether
payments made to a third party qualify as support amounts; in both cases, the answer is yes provided the governing order or agreement provides for such third-party payments for the benefit of the recipient or children in the recipient’s care; and - the amount is not a “child support payment” covered by new system rules effective May 1, 1997.
The nuances of what is an order can be complicated and professional help should be sought. Generally speaking, a written agreement should be a written document under which a person agrees to make regular payments to maintain his or her current or former spouse or common-law partner, children of his or her current or former spouse or common-law partner, or both. The agreement should normally be duly signed and dated by both parties. The courts have held that cancelled cheques, correspondence, and agreements which do not mention agreement to live separate and apart do not constitute a “written separation agreement”.
However, the Canada Revenue Agency (CRA) is prepared to accept that an exchange of written correspondence between the parties or their respective solicitors may be considered to be a written agreement if:
- there was the intention to create a binding and enforceable contractual relation;
- the exchange of written correspondence out lines all of the essential terms and conditions of the agreement in a clear and unambiguous manner; and
- there is a clear and unequivocal acceptance in writing by both parties of all those terms and conditions.
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