Calculating Income for Spousal and Child Support (1)

​​

This article reviews the main rules for calculating income for purposes of spousal and child support under the Divorce Act.

 

Spousal Support Advisory Guidelines [SSAG] s. 16 provides that, subject to ss. 17–20, a spouse’s income is determined based on the total income recorded in the spouse’s T1 General form issued by the CRA and adjusted in accordance with Schedule III of the Federal Child Support Guidelines [FCSG]. 

 

Start with the CRA T1 General tax return and adjust income according to rules set out in s. 17 to 20 in Schedule III of FSCG.  

 

Where a spouse is a shareholder, officer, or director of a corporation, include all or part of a spouse’s pre-tax corporate income. Look at the financial statements and the full T2 Corporate Tax returns. Be careful not to be fooled by GIFI statements which can be used to conceal relevant financial information.

 

Income may be imputed under s. 19(1) by the court where a spouse derives a significant portion of income from dividends, capital gains or other sources that are taxed a lower rate than employment or business income or that are exempt from tax, but it cannot be speculative or uncertain regarding future income.

 

The party seeking to impute income on the opposing party has the burden of proof with respect to both the evidentiary basis for imputation of income and quantum of imputed income. Marquez v. Zapiola, 2013 BCCA 433 at para 36.

 

Section 6.1 of the SSAG provides that the starting point for determination of income for spousal support purposes is the definition of income under the Federal Child Support Guidelines, [FCSG].

Section 15(1) of the FCSG provides that a spouse’s annual income is determined in accordance with ss. 16–20. 

 

Section 17(1) of the FCSG provides that where a spouse’s income pursuant to s. 16 is not the fairest determination of income, the court may have regard to the spouse's income over the last three years and determine an amount that is fair and reasonable in light of any pattern of income over those years.

  

Although s. 17 provides discretion to the court to apply an average of a spouse’s income, the court must first determine whether an averaging is appropriate, considering the spouse’s patterns of income, fluctuations in income and non-recurring gains: Phillips v. Saunders, 2020 BCCA 265 at paras. 23–25.

​

Section 18(1) of the FCSG provides that, where a spouse is a shareholder, officer, or director of a corporation, a court may include all or part of a spouse’s pre-tax corporate income in determining income for support purposes. 

​

Section 18(2) provides, among other things, that payments for benefits should be added to pre-tax corporate income. 

​

Imputing Income

​

Section 19(1) of the FCSG lists circumstances in which the court may impute income to a spouse, including the following important often used subsections:

​

(a) the spouse is intentionally under-employed or

unemployed, other than .. by the needs of a child… or by the

reasonable educational or health needs of the spouse;

 

(f) the spouse has failed to provide income information

when under a legal obligation to do so;

 

(g) the spouse unreasonably deducts expenses from

income;

 

(h) 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; and

 

* (i) the spouse is a beneficiary under a trust and is or will be

in receipt of income or other benefits from the trust.

 

The task of calculating income for purposes of child and spousal support under the Guidelines can be undertaken by professional accountants. Use the Schedule III tables for manual calculations, or online calculators to make quick estimates. Paying attention to the court’s findings in this case provides an example of the kinds of complexities that can arise.

​

Note 1: Healey v Healey 2022 BCSC 2072 para. 21-28​

​

​​