Determination of Income; Disclosure of Income

• Jurisdiction: Canada
• Pages: 117-277
• Author: Julien D. Payne,Marilyn A. Payne

117

CHAPTER 4

Determination of Income;

Disclosure of Income

A. WHOSE INCOME?

e obligor’s income is the foundation on which the provincial and territorial tables x the

monthly amount of child support. e income of the other spouse may also be relevant in cases

involving a child over the age of majority or obligors who earn more than $150,000 per year. In

addition, the income of the other spouse and possibly that of his or her household members

will be relevant to claims for special or extraordinary expenses under section 7 of the Federal

Child Support Guidelines, to situations involving split or shared parenting time under sections

8 and 9 of the Guidelines and to claims of undue hardship under section 10 of the Guidelines.1

B. WRITTEN AGREEMENT AS TO ANNUAL INCOME

Where both spouses agree in writing on the annual income of a spouse, the court may consider

that amount to be the spouse’s income for the purpose of the Federal Child Support Guidelines,

if the court thinks that the amount is reasonable having regard to the income information

provided under section 21 of the Guidelines.2 Speaking to section 15(2) of the Federal Child

Support Guidelines in Boutin v Boutin, Barrington-Foote JA, of the Saskatchewan Court of

Appeal, stated:

[62] . . . e fact that s. 15(2) requires that the judge have regard to income information pro-

vided under s. 21 does not mean that they can consider only that information. In particular, it

does not mean that a judge can only nd the agreement to be reasonable if they are satised

that the payor will be obliged to pay essentially the same amount of child support as if no agree-

ment had been made. . . . Nor need they turn a blind eye to everything but strictly nancial

 Auer v Auer,  ABQB .

 SOR/-, as amended, s (); Hayden v Hayden,  ABQB ; PHH v NRY,  BCSC ; Wood-

ford v Horne,  NSSC ; Richard v Holmes,  ONSC ; Boutin v Boutin,  SKCA . See

also Liggett v Doucet,  ONSC .

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118   ,  

considerations. e question of whether an agreement is reasonable permits a more nuanced

enquiry than that, in a manner that also takes proper account of factors such as threats and

foot dragging to avoid rewarding such unacceptable behaviour.3

Where a father derives his income from his private corporation and the parents have

negotiated a separation agreement with competent independent legal advice that provides

a mechanism for ongoing nancial disclosure and a determination of the father’s annual

income having regard to the fact that the father’s tax year end does not coincide with that of

his corporation, the court may uphold the agreement pursuant to section 15(2) of the Federal

Child Support Guidelines even though the dierence in the scal year of the parent and his

corporation results in a one-year delay in the parent’s reporting of the receipt of dividends

from the corporation.4

e court has a duty to ensure that a child support order reects the parent’s true income.

Spousal acknowledgement of a specied income in minutes of settlement does not estop

a party from subsequently asserting hidden income and may warrant an order for further

nancial disclosure, but a court should not sanction a “shing expedition” and may impose

the penalty of costs if the allegation of a higher income is not substantiated.5

C. DETERMINATION OF ANNUAL INCOME; USE OF CRA

TGENERAL FORM; STATUTORY ADJUSTMENTS

1) General Observations

Subject to section 15(2) of the Federal Child Support Guidelines, which deals with written

agreements,6 sections 16 to 20 of the Guidelines dene how income is to be determined by

the court in order to apply the Guidelines.7 For the purpose of those sections and also sec-

tion21,8 words and expressions used therein, which are not otherwise dened in section 2 of

the Guidelines, have the meanings assigned to them under the Income Tax Act.9

e objective of sections 16 to 20 of the Federal Child Support Guidelines is to establish

an amount that fully and fairly reects the income available for child support purposes.10

An examination of sections 16 to 20 and Schedule III of the Federal Child Support Guide-

lines makes it abundantly clear that the calculation of income for the purpose of applying

the Guidelines can be extremely complex. e degree of complexity will vary according to

the source of income and the particular circumstances of the case. Relevant factors include

whether the spouse or former spouse is self-employed or earns commission income, invest-

ment income, or dividend income and whether he or she has received capital gains. e

 Boutin v Boutin,  SKCA  at para .

 Miner v Miner, [] OJ No  (CA).

 Guar ino v Guarino, [] OJ No  (SCJ).

 See Miller v White,  PESC . And see Section B, above in this chapter.

 Snow v Wilcox, [] NSJ No  (CA).

 Section  of the Federal Child Support Guidelines denes the nancial disclosure obligations of a

spouse who is applying for a child support order and whose income information is necessary to deter-

mine the amount of the order.

 Federal Child Support Guidelines, SOR/-, s (); Bhandari v Bhandari, [] OJ No  (SCJ).

 WLG v ACG,  SKCA .

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Determination of Income; Disclo sure of Income 119

diculties will be compounded when the spouse or former spouse has voluntarily relin-

quished employment or is underemployed, or failed to realize the income earning potential

of property. e time has come when lawyers and judges must use computer software pro-

grams in order to determine the appropriate amount of child support. Gone are the days

of freewheeling negotiations and submissions premised on supposed going rates . Now, the

arithmetical calculations must be precisely applied and access to a reliable computer data-

base or an accountant is essential if errors are to be avoided in the more complex cases.11

Fluctuations in income during the year are only relevant to the determination of the

obligor’s annual income; they do not permit parties or the courts to reassess the monthly

amount of child support on a regular ongoing basis during the year.12

Section 16 of the Federal Child Support Guidelines calls for a exible approach that is

based on fairness to both parties. Accounting procedures applicable for the purpose of the

Income Tax Act are not necessarily the same for the Guidelines.13

Where the obligor’s income tax liabilities play a signicant role in the determination of

his or her income, the court may grant an order for child support on the assumption that

the obligor’s claim to a high deduction for taxes is legitimate, while reserving jurisdiction to

adjust the order in light of any new information that may be received.14

A determination of income should be based on demonstrated earning capacity and not

on self-serving speculation.15 e f act that the obligor’s income is derived from intensive

and physically demanding labour does not warrant any adjustment to that income under

the Guidelines. Although such income may not be sustainable over the long term, children

are entitled to a level of support that reects the obligor’s actual income, regardless of the

ease or diculty in earning it.16

Remuneration from public service or from secondary employment is not excluded from

an obligor’s income in assessing the amount of child support that is payable.17

2) Basic Steps for Determining Income

In Chan-Henry v Liu,18 Kent J of the British Columbia Supreme Court set out the following

three-step process for determining a parent’s income for child support purposes:

[164] First, reference is made to the spouse’s “total income” as set out in line 150 (now line

15000) of a standard form Income Tax Return (“ITR”). at ITR requires the spouse to item-

ize income from a wide variety of sources including:

• employment income;

• pensions;

 Meuser v Meuser, [] BCJ No  (CA).

 Lachapelle v Vezina, [] OJ No  (SCJ).

 Grin v Grin, [] BCJ No  (SC); GRR v JES,  NBQB  at para .

 Kaderly v Kaderly, [] PEIJ No  (TD).

 Asadoorian v Asadoorian, [] OJ No  (Gen Div).

 Yagelniski v Yagelniski, [] SJ No  (QB).

 Young v Young, [] BCJ No  (SC).

  BCSC  at paras –; see also Mach v Mach,  BCSC  at para , citing Sullivan v

Struck,  BCCA ; KAB v PDM,  BCSC .

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