Determination of income; disclosure of income
| Author | Julien D. Payne, Marilyn A. Payne |
| Pages | 119-250 |
DETERMINATION OF INCOME;
DISCLOSURE OF INCOME
A. WHOSE INCOME?
e obligor’s income is the foundation on which the provincial and territorial tables fix t he
monthly amount of child support. e income of the other spouse may also be relevant in
cases involving a chi ld over the age of majority or obligors who earn more than , per
year. In addition, the income of the other spouse and possibly that of his or her household
members will be relevant to clai ms for special or extraordinary expense s under section of
the Federal Child Support Guidelines, to situ ations involving split or shared custody u nder
sections and of the Guidelines and to claims of undue hardship under section of the
Guidelines .
B. WRITTEN AGREEMENT AS TO ANNUAL INCOME
Where both spouses agree in wr iting on the annual income of a spouse, the court may con-
sider that amount to be the spouse’s income for the purpose of the Federal Child Support
Guidelines, if t he court thinks that the amount is rea sonable having regard to the income
information prov ided under section of the G uidelines.
Where a father derives his income from his private corporation and the parents have
negotiated a separation agreement with competent independent legal advice which pro-
vides a mechanism for ongoing financia l disclosure and a determination of the father’s an-
nual income having regard to the fact that the fat her’s tax year end does not coincide with
that of his corporation, the court may uphold the agreement pursuant to sect ion () of the
Federal Child Support Guidelines even though the d ifference in the fiscal year of the parent
and his corporation results in a one-year delay in the parent’s reporting of the receipt of
dividends f rom the corporation.
SOR/-, as amended, s. (); Hayden v. Hayd en, ABQB ; Knight v. Knight, BCSC ;
V.C. v. J.D.B., NSSC . See also K .A.M.R. v. W.H.G., BCSC .
Miner v. Miner, [] O.J. No. (C.A.).
CHILD SU PPORT GUIDELINES IN CA NADA,
e court has a duty to ensure th at a child support order reflects the parent’s true
income. Spousal acknowledgment of a specified income in minutes of set tlement does not
estop a party from subsequently a sserting hidden income and may warrant an order for
further fina ncial disclosure, but a court should not sanction a “fishing exped ition” and may
impose the penalty of costs i f the allegation of a higher income is not substantiated.
C. DETERMINATION OF ANNUAL INCOME; USE OF CRA T
GENERAL FORM; STATUTORY ADJUSTMENTS
) General Observations
Subject to section () of the Federal Child Support Guidelines which deals with written
agreements, sec tions to of the Guidelines define how income is to be determined by
the court in order to apply the Guidelines. For the purpose of those sections and also sec-
tion , words and expressions used therein, which are not otherwise defined in section
of the Guidelines, have the meanings a ssigned to them under the Income Tax Act.
An examination of sect ions to and Schedule III of the Federal Child Support
Guidelines makes it abundantly clear that the calculation of income for the purpose of ap-
plying the Guidelines can b e extremely complex. e degree of complexity will vary accord-
ing to the source of income and the partic ular circumstances of the ca se. Relevant factors
include whether the spouse or former spouse is self-employed or earns commission income,
investment income, or dividend income and whether he or she has received capital gains.
e difficulties wi ll be compounded when the spouse or former spouse has voluntarily re-
linquished employment or is underemployed, or failed to realize t he income earning poten-
tial of property. e time has come when lawyers and judges must use computer softw are
programs in order to determine the appropriate amount of child support. Gone are t he 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 essentia l if errors are to be avoided in the more complex case.
Fluctuations in income during the year a re only relevant to the determination of the
obligor’s annual income; they do not permit parties or the court s to reassess the monthly
amount of child support on a regular ongoing ba sis during the year.
Section of the Federal Child Support Guidelines cal ls for a flexible approach that is
based on fairness to both pa rties. Accounting procedures applicable for the purpose of the
Income Tax Act are not necessarily the same for the Guidelines.
Where the obligor’s income tax liabilities play a signi ficant role in the determination of
his or her income, the court may grant an order for child support on the a ssumption that
Guarino v. Guarino, [] O.J. No. (S.C.J.).
See Section B, above in th is chapter.
Snow v. Wilcox, [] N.S.J. No. (C.A.).
Section of the Federal C hild Support Guidelines defi nes the financial di sclosure obligations of a spous e
who is applying for a chi ld support order and whose income in formation is necessary t o determine the
amount of the order.
Federal Child Suppor t Guidelines, SOR/-, s. (); Bhandari v. Bhanda ri, [] O.J. No. (S.C.J.).
Meuser v. Meuser, [] B.C.J. No. (C.A.).
Lachapelle v. Vezina, [] O.J. No. (S.C.J.).
Griffin v. Griffin, [] B.C.J. No. (S.C.).
Determinat ion of Income; Disclosure of Inco me
the obligor’s claim to a high deduction for taxes is legiti mate, while reserving jurisdict ion to
adjust the order in light of any new information that may be received.
A determination of income should be based on demonstrated earn ing capacity and not
on self-serving speculation. e fact that the obligor’s income is derived from intensive
and physically demanding labou r does not warrant any adjustment to that income under
the Guidelines. Although such income may not be susta inable over the long term, children
are entitled to a level of support that reflects the obligor’s actual income, regardless of the
ease or difficult y in earning it.
Remuneration from public service or from secondary employment is not excluded from
an obligor’s income in assessing the amount of child support th at is payable.
) Basic Steps for Determining Income
In Olchowecki v. Olchowecki, Wilkinson J., of the Saskatchewan Court of Queen’s Bench,
stated:
e basic approach in the determin ation of income is therefore:
() to employ s. to determine an nual income for the year in which the application is
heard, using the most cu rrent source(s) of income information available;
() t he combined effect of ss. and dictates that if there i s a material difference be-
tween the histor ical pattern of income and the determi nation under s. , the latter
should be questioned for fair ness;
() mere fact of d ifference does not make the s. determination un fair. e degree of
permanence associate d with the difference, the qual ity of the change i n income from
historical level s, and the reasons giving ri se to the change must all be considered: See:
Fuzi v. Fuzi, [] B.C.J. No. (B.C.S.C.);
() there is an additional t est of fairness applied to a s. determination of income i f s.
is implicated. If t he income earner is a shareholder, director or officer of a corporation,
the determi nation of income may include:
(a) al l or part of the pre-tax income of the corporation or any related corp oration for
the most recent taxation yea r; or,
(b) an a mount not exceeding that pre-tax income which i s commensurate with the
services prov ided to the corporation.
Added to the pre-tax income are any a mounts paid to or on behalf of persons who are not
at “arm’s length” unless the pay ments are proved to be reasonable;
() fairness in the applic ation of s. will depend on the nature of the relationsh ip between
the income earner and the cor poration, the nature of the corporation’s business, the
legitimate cal ls on the corporate income, and the corporation’s capitalizat ion require-
ments, with the cour t having the ability to con sider the historical income pattern of
the spouse and non-recurri ng gains or losses: See: Kowalewich v. Kowalewich, []
Kaderly v. Kad erly, [] P.E.I.J. No. (T.D.).
Asadoorian v. Asadoorian, [] O.J. No. (Gen. Div.).
Yage lnisk i v. Yag elni ski, [] S.J. No. (Q.B.).
Youn g v. Youn g, [] B.C.J. No. (S.C.).
SKQB at para . .
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