Child Support Guidelines
Determination of Income

Background
The amount of child support awarded by the court is based on the income of the support payor and, in some cases, the income of the support recipient. The child support guidelines have rules about how income is determined. In other pamphlets, we help you to understand how an appropriate amount of child support is determined when parents separate. This pamphlet deals with how Courts determine income.

Importance of Determining Income
The federal government instituted child support guidelines in 1997 in response to criticism that there was inconsistency in the amount of child support awards. The guidelines consist of a set of rules and tables for calculating the amount of support that a non-custodial parent should contribute toward his or her children. The table takes into account three factors:

• Level of income of the paying parent
• Number of children
• Province or territory of residence

The table amount is based on the payor's income with no consideration of either the recipient's income or the actual expenses of the children. The table amounts are based on the average costs of raising a child. The rules provide for deviations that may be made from the table amounts. The guideline system applies to all support cases in Ontario Courts.

Whose Income is Considered
The payor's income is relevant in every application for child support. The support recipient's income will be relevant in cases where:

• He or she is seeking special or extraordinary expenses to be added to the table amount
• A party seeks a reduction in the table amount due to undue hardship
• The payor's income exceeds $150,000 annually
• A spouse stands in the place of a parent
• Custody is split or shared
• A child is over the age of majority

Income Determination
Income is determined by one of two methods:

• By agreement between the parties, or
• As determined by the Court

Income Determination by the Court
Courts must determine income by the rules set out in the guidelines. The highlights of these rules are:

• Current income must be determined in the fairest way possible and the most current information must be used
• All sources of income set out under the heading "total income" in the T1 general form (your income tax return) issued by Revenue Canada are examined. Courts do not determine income on the basis of the preceding year's tax return. Courts should determine current income referring to the sources of income. Courts must determine "current" income, not historical income. Support is paid out of the future income of the payor and not from what he or she has earned in the past. Past income may serve as a basis to predict future income, and historical data and financial information may provide a forecast of future income
• All income must be taken into account in determining income for guidelines purposes, including bonuses, overtime, profit-sharing, second jobs etc.

Adjustments to income are made in accordance with Schedule III , including:

Thirteen categories of employment expenses are to be deducted from an employee's annual income
Any child support included to determine total income is to be deducted from the receiving spouse's income
Only social assistance income attributable to the spouse (not children) is included in that spouse's income
Only the actual amount of dividend income received by the spouse is included
The entire net capital gains must be included in the spouse's income
For a self-employed spouse, payments made to person with whom that person does not deal at arms length are included back into the income of the payor spouse unless the payment was necessary and reasonable
Capital cost allowance in respect of real property deducted for tax purposes is added back into income

The Court may then make adjustments to income when appropriate:

In accordance with a pattern of income, when the payor's income fluctuates
If the payor is a shareholder or director of a company and the income adjusted by Schedule III does not fairly reflect the money available to the support payor for child support
The court may impute income in certain circumstances
Where the income from an income source of the support payor fluctuates from year-to-year
Where an income source that has consistently risen or declined - the Court may consider the spouse's current annual income from that source to be the amount in the spouse's most recent tax year
Where an income source does not consistently increase or decrease (but rather fluctuates up and down in the previous 3 years) - the Court may average the income from that source over the three most recent tax years
Where a non-recurring income source is received during any of the three most recent tax years, the Court may include none or any portion of the amount according to what it considers to be appropriate
Where a spouse is an officer, director or shareholder of a corporation and where the Court determines that the spouse's annual income as otherwise determined does not fairly reflect all the money available to the spouse for the payment of child support, the Court may attribute some of the corporate income back to the spouse

Courts "may impute such amount of income to a spouse as it considers appropriate" under a list of non-exclusive circumstances including:

The spouse is intentionally under-employed or unemployed
The spouse is exempt from paying Federal or provincial Income Tax
The spouse lives in a country that has effective rates of income tax that are substantially lower than Canada
It appears that income has been diverted which could affect the level of child support to be determined under these guidelines
The spouse's property is not reasonably utilized to generate income
The spouse has failed to provide income information when under a legal obligation to do so
The spouse unreasonably deducts expenses from income
The spouse derives a significant portion of income from dividends, capital gains or other sources that are taxed at lower rate man employment or business income
The spouse is a beneficiary under a trust and is or will be in receipt of income or other benefits from the trust
Where a spouse is not a resident of Canada, his or her annual income is determined as though he or she is a resident of Canada". Therefore, a determination of annual income applies to a nonresident in the same way as it applies to resident.

Financial Disclosure Requirements under the Child Support Guidelines
Disclosure is required when an application has been made or when the support recipient makes a written request (not more than once a year) after the an order has been granted. If a spouse's income is relevant to the determination of child support, he or she will be required to provide:

• Copies of every personal income tax return filed for the 3 previous taxation years
• Copies of every notice of assessment or re-assessment issued for the 3 previous taxation years
• A statement of earnings or letter from the employer setting out the current rate of annual salary and remuneration with year to date information
• Financial statements of the business or practice for the 3 previous taxation years
• Confirmation of partnership income, draw and capital in a partnership for the 3 previous taxation years
• Financial statements of any corporation controlled by a spouse and its subsidiaries for the 3 previous taxation years.

If you have questions about any of the issues described in this pamphlet, you should speak to us regarding your individual circumstances. Your choice of legal counsel is a critical and personal decision. The firm you select should be committed to your business and personal needs.

Revision Date: April 13, 2001

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NOTE: This brochure provides general information and is not intended to be a legal opinion. Readers are cautioned not to rely on this information without obtaining legal advice with respect to their own circumstances.