By Kathleen Wells, Wells Family Law
Recent Tax Changes Effect Child Support
Times change, and legislation must change alongside. The Federal Child Support Guidelines [i] are no exception to this rule; in November of 2017, the Government of Canada updated the child support tables to reflect the more recent tax rules in effect in Canada. The child support tables set out the basic monthly amount of child support owing. All child support payable after November 21, 2017 will follow the updated tables; this is the first update to the Guidelines since 2011. Updating the child support tables helps to ensure that they effectively reflect a parent’s capacity to pay and contribute to the financial well-being of their children.
How do the child support tables work?
The child support tables are based on a mathematical formula that takes into account a paying parent’s income, as well as tax rules, to come up with the amount of child support that is payable. The tables consider the number of children in the family, from one to six children. They also take into account annual income, and the levels of income rise in increments of $1,000, up to an annual income of $150,000. In addition, each province and territory has their own table based on their provincial or territorial taxes.
How do the changes affect your payments?
The updated Guidelines may lead to a change in the amount of child support that a payor parent owes. If a payor is paying less income tax based on the new tax rules, they may find that they have to pay more child support under the updated Guidelines. This is because they are now considered to have a greater amount of disposable income, so they can therefore pay more child support. On the other hand, if a payor is paying more income tax, their child support obligations might be lessened, because they have less disposable income based on the increased tax burden.
For example, consider a parent living in Alberta who has to pay child support for two children and has an annual income of $150,000. Using the updated 2017 Guidelines, the basic amount of child support owing for these two children would be approximately $2,133. Under the Federal Guidelines from 2011, the amount of child support owing for the children would be $2,099. This is a net difference of $34 per month.
Once a paying parent’s income rises above $150,000, the calculation changes and becomes slightly more complicated. Assume that the parent paying child support lives in Alberta, has an income of $350,000 per year, and two children. The Guidelines state that for any income over $150,000 there is another chart that is to be used, found at the end of the child support tables. This chart states that the monthly award for this particular payor would be $2,099, plus 1.34% of income over $150,000. An annual income of $350,000 is $200,000 over this amount; 1.34% of $200,000 is $2,680. Therefore, for a payor parent with two children and an annual income of $350,000, the total amount of monthly child support owing is $4,773. Under the 2011 version of the Guidelines, the same payor parent would pay $4,779, roughly the same amount.
The updated Guidelines are effective as of November 21, 2017; all child support orders made after that date will use these new Guidelines. For any child support owing before this date, the 2011 version of the Guidelines must be used. Prior to 2011, the last update to the Guidelines was in 2006.
Retroactive child support
For retroactive child support orders, the court has ruled that actual income from the year that the particular set of Guidelines applied to must be used to figure out the amount owing.[ii] For example, a paying parent’s 2007 annual income would be used alongside the 2006 Guidelines to calculate child support for that period of time; their 2013 income would apply the 2011 Guidelines; and a payor’s 2018 annual income would be used with the 2017 updated Guidelines to calculate the actual amount of child support owing.
The new Guidelines have only been in effect for a few months, and they will be used by the courts going forward, but they may have an additional impact on the amount of child support ordered by the courts. Section 14 of the Guidelines states that the below circumstance may give rise to a variation in the amount of child support payable:
- in the case where the amount of child support includes a determination made in accordance with the applicable table, any change in circumstance that would result in a different child support order.[iii]
In order for there to be a variation to a child support order, the onus is on the party seeking the variation to prove that there has been an intervening event that would result in a different order for child support. The Canadian government has indicated that, in their view, if the amount of child support payable or receivable changes as a result of the update to the Guidelines, this would constitute a “change in circumstance.” An application could be made to the courts to vary an existing child support order. As yet, there is no reported case to make use of this variation.
If you think you may be entitled to pay less, or receive more, child support based on the updated Guidelines, please contact Wells Family Law for a free consultation – we are Calgary-based divorce lawyers who are committed to a fast and effective resolution.
[i] Federal Child Support Guidelines, SOR/97-175.
[ii] Laxton v. Coglon, 2017 BCSC 1544, 2017 CarswellBC 2392.
[iii] Federal Child Support Guidelines, ibid., s.14.