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Lorne MacLean, QC, Founder

Calculating Child Support Income is a key step in ensuring a fair child support result. In cases of business owners and self-employed persons, a thorough analysis of the paying parent’s true incomes is necessary. Simply using a self-employed person’s income tax return is the most common fatal error to properly calculating child support income. Assessing international incomes involves reviewing tax rates that may be more favourable than in Canada and making adjustments. The higher the income the higher the stakes and the greater the need to hire a senior lawyer who handles these type of cases daily is crucial. Contact our child support lawyers in Calgary and across BC.

Calgary Calculating Child Support Income Call 1 877 602 9900

One of the most basic principles in family law is the relationship between parenting time and financial support for children – first, we determine parenting time of the children (ie. sole, shared, split, etc.); then we determine child support. Child support is the right of the child. Both parents have an obligation to financially support their dependent children; the custodial parent provides financial support by paying for food, clothing, housing and other things for the children; the non-custodial parent has an obligation to pay a reasonable amount of child support to the custodial parent to compensate for their share of these expenses. But how is this reasonable amount of child support determined? Calculating Child Support Income properly is the starting point. Peter Graburn of our Calgary office provides a quick summary for family clients wanting to get proper child support.

Previously, the custodial parent had to establish the amount of financial support the children needed and that the non-custodial parent had the financial ability to pay such support. This would often result in long court battles with inconsistent results. In May 1997 (adopted by Alberta in 2005 and updated in 2017 for inflation), the federal government passed the Federal Child Support Guidelines to provide some consistency and direction in determining the amount of child support to be paid. The Guidelines are designed to establish “a fair standard” of financial support of the children for both ordinary [ie. food, clothing, and housing (Section 3s)] and extraordinary [ie. childcare, health & dental, school and extra-curricular (Section 7s)] expenses based on the number of children to be supported and the payor’s annual income. But how do the Guidelines determine this annual income for calculating child support income purposes?

Section 16 of the Guidelines sets out that a payor’s annual income is determined by using their total gross (ie. before tax) income as set out in Line 150 of their most recent T1 General Income Tax Return (subject to certain adjustments). While this method of determining annual income is fine for the average employee with a reasonably stable wage or salary, what if the payor is self-employed or on commission and earns widely fluctuating incomes year-over-year? In this situation, Section 17(1) of the Guidelines provides:

17(1) If the court is of the opinion that the determination of a spouse’s annual income under section 16 would not be the fairest determination of that income, the court may have regard to the spouse’s income over the last three years and determine an amount that is fair and reasonable in light of any pattern of income, fluctuation in income or receipt of a non-recurring amount during those years.

Accordingly, Section 17 of the Guidelines states that if it wouldn’t be fair to use the payor’s Line 150 income from the previous year’s tax return to determine the payor’s current income earning capacity for child support purposes, the Court may (not must) use at least two (2) other ways to determine this income:

3-Year Average – the Court can take the average of the payor’s Line 150 income from their three most recent tax returns to determine current income for child support purposes, thus using past income to try to predict future income. This is the reason 3 years’ tax returns are required to be produced by the parties as part of the obligation to provide current financial disclosure, or;

Current Income – perhaps the simplest way to determine income for child support purposes is to use current year-to-date income (taken from current paystubs or earnings statements etc.) as grossed-up for the whole year to project what the payor’s annual income will be at the end of the current year (provided that the year-to-date earnings are expected to be reasonably consistent for the remainder of the year).

Vancouver Calculating Child Support Income Call 1 877 602 9900

For Business owners and self-employed persons, another special rule applies that makes it clear relying only on the personal tax return of the paying spouse is inappropriate if you want to ensure you are Calculating Child Support Income properly:

18 (1)Where a spouse is a shareholder, director or officer of a corporation and the court is of the
opinion that the amount of the spouse’s annual income as determined under section 16 does not
fairly reflect all the money available to the spouse for the payment of child support, the court may
consider the situations described in section 17 and determine the spouse’s annual income to
include
(a) all or part of the pre-tax income of the corporation, and of any corporation that is related to that
corporation, for the most recent taxation year; or
(b) an amount commensurate with the services that the spouse provides to the corporation,
provided that the amount does not exceed the corporation’s pre-tax income

As indicated above, the Federal Child Support Guidelines have taken some (but not all) of the fight out of determining child support between separating or separated parents.  While the Guidelines have set out numerous ways to determine annual income for child support purposes and formulas for determining how much basic financial support (ie. food, clothing and housing) must be paid between the parents, there are still many possible areas of dispute in finally determining the amount of child support to be paid upon the breakdown of the parent’s relationship, including:

  • the extent of extra-curricular activities of the children;
  • undue hardship in paying even the “table amount” set out in the Guidelines;
  • imputing a higher income where the payor is intentionally unemployed or under-employed;
  • whether Schedule III adjustments to annual income should apply to the payor.

Get Help From Senior and Experienced Family Lawyers Call 1 877 602 9900

Our skilled Calgary Calculating Child Support Income lawyers help our clients understand the many ways annual income may be determined to calculate child support payable under the Federal Child Support Guidelines, and act on behalf of their clients in mediation or Court to resolve the many other issues that may arise in finally determining the actual amount of child support that must be paid on behalf the children.