Unraveling the Complexity of Child Support Income: Key Factors and Guidelines

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Determining a former spouse’s income for child support purposes is not always as straightforward as it sounds.

For many employed people, establishing your total income before taxes is as simple as looking at Line 15000 (formerly 150) on your tax return.

However, the intricacies of Canada’s tax and family law regimes mean that former spouses can’t rely on that number alone when it comes to setting the amount of child support owed by one to the other.

Read on to learn more about what the Federal Child Support Guidelines say about deductions and additions to a parent’s income, and how an experienced family lawyer can make sure you don’t fall foul of the rules.

Child Support Basics

In B.C., every dependent child has the legal right to receive financial support from both parents, whether or not they live together.

In general, that entitlement stretches until the child reaches 19, unless there is a reason they are considered dependent beyond that age, which may include a disability or their pursuit of post-secondary education.

Basic child support is generally paid directly to the parent who has the majority of the parenting time with the child. In cases where parents have agreed to a shared parenting time schedule — defined as anywhere from a 50-50 arrangement to 60-40 — an offset calculation is applied based on the amount each parent would owe if the other had sole parenting time. The person with the higher income will generally pay the other parent the difference between the two figures.

Income Deductions

Key to all of these calculations are the Federal Child Support Guidelines, which take as its starting point the gross incomes of both parents, subject to certain allowable deductions.

The challenge comes from the fact that the deductions allowed under the Income Tax Act do not line up perfectly with those permitted under the guidelines, so it is not unusual for parents calculating their taxable income to come up with a completely different number for the purposes of a child support calculation.

Schedule III of the guidelines sets out the deductions allowed for employed spouses, which could include sales and travel expenses, as well as certain fees and dues associated with professional memberships.

The calculation can become even more complex in cases involving self-employed parents because of the potential for mingling personal and business expenses. However, the guidelines leave room for recipient spouses to challenge the reasonableness of a payor’s expense deductions, even if the Canada Revenue Agency has already accepted them.

In addition, when it comes to salary, benefits and any other payments made by a self-employed person to a close family member or other non-arm’s length individual, the guidelines place the onus on them to establish the payments were reasonable in the circumstances if they want them deducted from their income for child support purposes.

Income Additions

An added wrinkle to the child support income calculation comes in the form of worker’s compensation and other tax-free income replacement benefits, which may result in an upward adjustment of a parent’s income.

Under the Federal Child Support Guidelines, these amounts may be boosted to reflect the gross income level that would have been needed to receive the same amount as after-tax income.

For this reason, recipient spouses and their counsel must study the tax forms of child support payors to identify the source and type of all their various income streams. Payors may also need legal advice on the nature of their income sources and whether they will affect their income for child support purposes, since family laws put the onus on them to notify recipients of any change in their income.

*This post is not intended to be legal advice and should not be taken as such. Please contact McConnan Bion O’Connor & Peterson if you have any questions regarding this post or require assistance or legal advice regarding child support or another family law matter.