The Provincial and Federal Child Support Guidelines are intended to establish a fair standard of support for children and ensure that children continue to benefit from the financial means of both parents following separation.
The process to determine appropriate support includes full and complete financial disclosure by one or both parents. Disclosure must be provided in a transparent and understandable format, to allow meaningful review by the recipient parent and if necessary, a Court. It is not sufficient for a parent to provide disorganized bundles of receipts, papers, and bank statements, nor is it acceptable to tell the other parent to “talk to my accountant”.
Documents that are commonly used as part of the financial disclosure include:
Income tax returns and CRA notices of assessment for the past three years
Documentation relating to payments received from social assistance programs such as disability or employment insurance or workers’ compensation and other sources of income
Records relating to income producing assets such as real estate and investments
Records relating to revenue and expenses for self employed parents
Corporate financial statements and tax returns when one parent has an interest in a corporation
There are other items as well that may be required to be disclosed depending on each particular situation and where and how the parents derive their income.
Does All Reported Income Count When Determining Child Support?
Many people assume that they merely have to look at line 150 of their income tax return to establish their income for support purposes. This is incorrect. Line 150 merely provides the total of all of the various sources of income. It is important to look at all of the sources of income listed above line 150to determine whether any of the listed income sourcesrequire any sort of “special treatment”. For example, if one parent sells RRSPs in a given year, the amount received will likely show up on his or her tax return for that year. This amount will also be included in the total set out at line 150. However, it may not be appropriate to include that amount in the parent’s income for support purposes as he or she may have already previously paid child support on the income used to purchase those RRSPs or the other parent may have already received his or her entitlement to a share in the RRSPs through a division of property.
When one spouse is paid by way of dividends or earns an income in another country that has different tax rates from Canada the amount used for support purposes needs to be increased or decreased to be on par with what a Canadian employee would pay in tax so all support payors (and their children) are treated as equally as possible.
These are just a couple of examples of the way different income sources are treated and why it is not always appropriate to simply use line 150 from an Income Tax Return to arrive at a guideline income for support purposes.
What Happens if a Parent Fails to Disclose their Income?
If you are the recipient of supportand the other party refuses to provide financial disclosure to you despite repeated requests and despite bringing a formal disclosure application (called a Notice to Disclose application in Alberta) be aware that s.19(1)(f) of the Federal or Alberta Child Support Guidelinesallows the court to impute (assign) an income to the other party. Ask for the other party’s income to be imputed high enough to encourage disclosure in the future. Most people do not want to have their income level set higher than it actually is.
If you are a payor of support and have been asked to provide your financial disclosure, do it. The Alberta courts do not look kindly on parties who seek to avoid their disclosure obligations. It is very common for people who refuse to disclose to be ordered to pay court costs to the other party.
Will the Courts Take Me at My Word?
An Alberta Court of Appeal ruling from 2018 shows that a party’s guideline income cannot be determined solely on the oral testimony of that party. In that case, (Ripulone v Smith, 2018 ABCA 167), the father failed to provide the necessary disclosure despite repeated requests and a formal notice to disclose. Rather, he directed the mother to “contact his accountant”, who also failed to reply. The Father then gave oral evidence in court on what his income was. This oral evidence was not substantiated by any independent documentation. The Court of Appeal stated that financial disclosure is a legal obligation and the court cannot make a decision without complete disclosure. The Court of Appeal held that it is improper to rely on the oral evidence of a party who has failed to disclose.
If you are seeking help with a child or spousal/partner support dispute or require assistance in amending a previous support order or agreement, please contact one of the family law lawyers at SVR Lawyers to discuss your matter.