New approach in Alberta to imputing income to underemployed and unemployed parents.

• Author: Dargatz, Sarah

JANUARY 12, 2023 BY SARAH DARGATZ

Reading Time: 4 minutes

In 2022, the Alberta Court of Appeal in Peters v Atchooay changed course and adopted the reasonableness test for imputing income to calculate child support.

The amount of child support a parent pays is based on their income. For many parents, figuring out their income means looking at their tax return. However, sometimes a parent's tax return does not reflect their true income. In these cases, the law allows a judge to "impute" their income for to calculate child support. Imputing income might be necessary where a parent earns non-taxable income, lives in another country, or is self-employed.

Imputing income may also be necessary if a parent is underemployed or unemployed. The Federal Child Support Guidelines (and mirroring provincial guidelines) allow a judge to impute a parent's income where that person is "intentionally under-employed or unemployed, other than where the under-employment or unemployment is required by the needs of a child of the marriage or any child under the age of majority or by the reasonable educational or health needs of the [parent]" (section 19(1)(a)).

The (old) deliberate evasion test

It is up to the court to interpret this section and impute an income it "considers appropriate". For over 20 years, judges in Alberta interpreted this section differently than judges in other Canadian provinces. The 2001 Alberta Court of Appeal decision in Hunt v Smolis-Hunt limited imputing income under this section to circumstances where a parent deliberately sought to evade their child support obligations. A judge had to find proof a parent specifically intended to undermine or avoid their support obligations. This is the "deliberate evasion test".

In all other provinces, judges considered whether a parent's choice of employment that did not maximize their earning capacity was reasonable ("the reasonableness test"). The Supreme Court of Canada did not weigh in to clarify the issue. Using the deliberate evasion test in Alberta meant it was much more difficult to impute a parent's income in cases of under-or unemployment. That changed in the 2022 Alberta Court of Appeal decision in Peters v Atchooay.

The (new) reasonableness test

Courts of appeal usually do not change the law made in past decisions. Canada's common law legal system relies on following precedents set by earlier decisions. This provides certainty and stability to our justice system. However, a court can...