How to Impute Income And the Impact on Child and Spousal Support Payments

Typically, calculating child support is fairly straightforward whereby the payor’s income and the number of children of the marriage determine the amount of support pursuant to the Federal Child Support Guidelines. However, hiding income or intentionally under employing oneself can be an issue when determining the amount of support payable after separation. When a person’s financial statements do not accurately reflect their income for spousal support or child support purposes, the Court can “impute”, or make up additional income to them based on a number of different factors.

Family Law Act – Child Support Guidelines

According to section 19(1) of the Federal Child  Support Guidelines, the court may impute the amount of income to a parent that it considers appropriate in the circumstances, and those circumstances include the following:

1. the spouse is intentionally under-employed or unemployed, except where the under-employment of unemployment is required by the needs of a child of the parents or any child under the age of majority or by the reasonable educational or health needs of the parent;
2. the spouse is exempt from paying federal or provincial income tax;
3. the spouse lives in a country that has effective rates of income tax that are significantly lower than those in Canada;
4. it appears that income has been diverted which would affect the level of child support to be determined under these Guidelines;
5. the spouse’s property is not reasonably utilized to generate income;
6. the spouse has failed to provide income information when under a legal obligation to do so;
7. the spouse unreasonably deducts expenses from income;
8. the spouse derives a significant portion of income from dividends, capital gains or other sources that are taxed at a lower rate than employment or business income or that are exempt from tax; or
9. the spouse is a beneficiary under a trust and is or will be in receipt of income or other benefits from the trust.

Intentional Under-Employment or Unemployment

Another common issue in the calculation of child or spousal support income is the intentional under-employment or unemployment of the payor which leads to an amount of support that is not considered fair. Alberta is the only jurisdiction in Canada which has adopted the stringent test outlined in Hunt v. Smolis-Hunt (2001) in determining whether a party is intentionally under-employed or unemployed. The Court established that to allege under-employment, the alleging party must show an intent to avoid a support obligation, not that the party is simply not maximizing their income potential. The test was clarified by the Alberta Court of Appeal in Keating v. Keating (2017) when it was decided that the circumstances must permit that the payor took unreasonable actions to “undermine or avoid” his/her support obligations.

Worried About Your Income? Here are Some Tips

The best way to ensure that the court does not impute income to you, is to ensure that you come to the table with your hands clean. This means cooperating with the exchange of financial disclosure and ensuring that you provide all documents in accordance with a Notice to Disclose Application. A lawyer can assist you with reviewing your financial disclosure as well as your spouses to ensure you both have accurate income information.

Disclaimer: The content provided in the blog posts of Jones Divorce & Family Law is general information and should not be considered legal advice. Please contact a lawyer for legal advice tailored to your specific situation. All articles are current as of their original publication date.