Determination of Income; Disclosure of Income

• Author: Julien D. Payne - Marilyn A. Payne
• Pages: 121-244

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 

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 b e 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 cla ims of undue hardship under section  of the

Guidelines .

B. WRITTEN AGREEMENT AS TO ANNUAL INCOME

Where both spouses agree in w riting 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 the 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 t he 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 ; Myers v. My ers, [] N.S.J. No. 

(S.C.) ; P.M.C. v. R.L.C ., [] N.S.J. No.  (Fam. Ct.) (application under Family Maintenance Act and

provincial g uidelines); V.C. v. J.D.B.,  NSSC .

 Miner v. Miner, [] O.J. No.  (C.A.). See also Crabtree v. Crabtree, [] O.J. No.  (S.C.J.).

 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 a re 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 particular circumstances of the case. 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 software

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 are 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 this cha pter.

 Snow v. Wilcox, [] N.S.J. No.  (C.A.).

 Section  of the Federal Child Support Guidelines def‌i nes the f‌inancial dis closure obligations of a spouse

who is applying for a ch ild support order and whose income in formation is necessary t o determine the

amount of the order.

 Federal Child Support Guidelines, SOR/-, s. (); Bhandari v. Bhand ari, [] O.J. No.  (S.C.J.).

 Reid v. Reid, [] B.C.J. No.  (S.C.); 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 jurisdic tion 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 court must take account of income received for overtime

and standb y hours.

e fact that the obligor’s income is derived from intensive and physically demanding

labour does not warrant any adjustment to that income under the Guideli nes. Although

such income may not be sustainable over the long term, children are entitled to a level of

support that ref‌lects the obligor’s actual income, regardless of the eas e or dif‌f‌iculty in earn-

ing 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 Olchoweck i v. Olchowecki, Wilki nson J., of the Saskatchewan Court of Queen’s Bench,

states:

e basic approach in the determin ation of income is therefore:

() to employ s.  to determine annua l 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 is a mater ial 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 in income from

historical level s, and the reasons giving rise t o the change must all be considered: See:

Fuzi v. Fuzi, [] B.C.J. No.  (B.C.S.C.);

() there is an additional te st of fairness applied to a s.  determination of income if 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 corpor ation 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;

 Kaderly v. Kad erly, [] P.E.I.J. No.  (T.D.).

 Asadoorian v. Asadoorian, [] O.J. No.  (Gen. Div.).

 Baddeley v. Baddeley, [] B.C.J. No.  (S.C.) (overtime income included i n light of historical p attern

but amount adjusted to ref‌le ct access to child every ot her weekend).

 Yagelniski v. Yagelniski, [] S.J. No.  (Q.B.).

 Youn g v. Youn g, [] B.C.J. No.  (S.C.).

  SKQB  at para. . See also S .D.Z. v. T.W.Z.,  ABQB  at para s. –; Gursky v. Gursky,

[] S.J. No.  (Q.B.); Kardash v. Kardash,  SKQB ; R.E .G. v. T.W.J.G.,  SKQB .