By Kathleen Wells, Wells Family Law
Calculating the amount of child support that a paying parent owes can be complicated. In Canada, the amount of child support that is payable is based on the Federal Child Support Guidelines [i]. The Guidelines attempt to serve several purposes. Firstly, and perhaps most importantly, their purpose is to establish a fair standard of monetary support for children that ensures that they will continue to benefit from the financial means of both parents after separation. Having the Canadian government set a fixed, standard amount of child support payable means that there should be less conflict between ex-spouses: the child support order is objective. The Guidelines give the courts guidance to help them figure out the amount of child support that must be paid. Lastly, having standard amounts for child support will help to ensure parents and children who are in similar circumstances are treated consistently [ii].
In order to determine the correct amount of child support that is owed, it’s critical to first figure out annual income. Generally, only the income of the parent who will be paying the support matters. However, there are some instances where the annual income of both parents will be taken into account; these include situations where the parents share custody of the children, if there are special or extraordinary expenses, if the child is over the age of majority, or if either parent has claimed undue hardship.
Determining Child Support Payments
To figure out the amount of child support that a paying parent should pay:
- In the Guidelines, find the province that you live in and the table for that province;
- Enter the annual income of the parent paying support;
- Enter the number of children that the child support applies to;
- Add the appropriate basic amount of support payable; and
- Multiply the applicable percentage by the portion of income that exceeds the lower amount of the income range.
The figure that you get is the amount of child support that the paying parent owes each month.
However, the calculation is not always that simple. Finding the annual income of the parent paying support is easy to find if the parent has a steady job: their income amount is based on line 150 of their T4 Statement of Remuneration slip from Canada Revenue. What happens if a parent is self-employed, is acting dishonestly, or has an irregular income?
The Guidelines recognize that a T4 may not represent all of a paying parent’s total income and accounts for this issue in sections 17, 18, and 19. Section 17 permits the court to look at the pattern of a parent’s income over the previous three years to determine an annual amount that is reasonable [iii]. Essentially, the court will use their discretion to determine the paying parent’s income. This section comes into play if the parent is self-employed and their income changes from year to year: the court will find a reasonable amount of annual income that is fair to both parents and, above all, to the children.
Section 18 of the Guidelines deals with circumstances where the parent is a corporate shareholder, director, or officer: these people may earn income that will not appear on a T4. Among other situations, issues may arise if a paying parent is the sole shareholder of a corporation, because that shareholder has the ability to control the income of the corporation – they corporate income will appear high, while the personal income of the shareholder will appear low. If the court suspects that this situation is occurring, and the paying parent’s T4 income doesn’t fairly reflect all of the income that should be available to pay child support, they will consider the corporation’s financial statements and adjust the amount of the parent’s annual income to reflect the true amount available for support [iv].
The court will use section 19 of the Guidelines to attribute income to a parent if they suspect the paying parent’s T4 isn’t giving a complete picture of their income: this is called imputing income. Under section 19, the court will impute income:
- If they think the parent is intentionally unemployed or under-employed;
- If the parent is exempt from paying federal or provincial income tax;
- If the parent is living in a country that has significantly lower income tax rates than Canada does;
- If it seems that the parent has been diverting income to lower the amount of child support they’re required to pay under the Guidelines;
- If the parent isn’t reasonably using their property or investments to generate income;
- If the parent isn’t disclosing their financial information when they’re legally obligated to do so;
- If the parent is unreasonably deducting expenses from their income;
- If the parent is gaining a significant portion of their income from dividends, capital gains, or other sources that are taxed at a lower rate than other income; or
- If the parent is the beneficiary under a trust or will receive income or other benefits from a trust [v].
The parent who wants to impute the income to the other parent bears the burden of proving that the other party is intentionally unemployed or underemployed. There doesn’t need to be any evidence of acting in bad faith, or proof that the parent is deliberately trying to avoid their support payment obligations: the paying parent is intentionally underemployed if they earn less than they are capable of earning, taking all circumstances into account. In the case of a parent refusing to be forthcoming in disclosing all of their finances, the court will hold that lack of disclosure against them and may impute income to them [vi].
In the end, when making a child support order, the main focus of the court will always be to act in the best interests of the children who will be receiving the support.
If you have questions about the amount of child support you are either paying or receiving, please contact Wells Family Law for a free consultation-we are Calgary divorce lawyers committed to a fast and effective resolution.