Vaughan Family Lawyers Advising on Income Determination
Income determination is a necessary part of most separation and divorce matters. Each spouse’s annual income is a primary consideration when calculating the child support and spousal support owed by or to each spouse. Determining a person’s income can be a complicated and contentious issue between the parties and is tied to the legal obligation to provide thorough and accurate financial disclosure.
At GDH Family Law, our team of innovative divorce lawyers has extensive experience helping clients understand the factors affecting income determination for support purposes. We can assist at any stage of a family law matter and preserve our clients’ rights by ensuring both parties’ income is calculated fairly and accurately.
How is Income Determined for Support Purposes?
A payor’s income for support purposes is generally determined in accordance with the Federal Child Support Guidelines. When a person has only one employer and receives a T4 tax slip every year, their income is generally the “total income” listed on their most recent tax return.
Determining a person’s income becomes more complicated where they are self-employed or receive income through other sources. For example, they may have shares in a corporation or own a property that generates rental income. It is advisable to have a qualified family lawyer help with this calculation when you have multiple sources of annual income. In situations where one party’s income structure is complex or where a portion of their income is derived from ownership in a corporation or business, it may be appropriate to obtain an expert report from a Chartered Business Valuator.
Proof of Income
Parties in a family law matter are required to provide full, frank, and up-to-date financial disclosure. Examples of documentary evidence that may be needed to determine a party’s annual income include:
- Income tax returns;
- Notices of Assessment and Reassessment from Canada Revenue Agency;
- Paystubs, Statements of Earnings, or letter from the party’s employer(s) confirming their salary or wages;
- Statements for money received through government assistance, including employment insurance payments, social/employment and income assistance, workers’ compensation benefits;
- Insurance benefits, including long or short-term disability payments, income replacement for motor vehicle accident injuries, etc.
Variable Annual Income
When a party’s income fluctuates from year to year, one option may be to use the amount listed in their most recent income tax return for their income determination. In some cases, the parties or the court may choose to average the person’s last three years of income.
Imputation of Income
In some situations, a party’s income calculation under the Federal Child Support Guidelines is not a fair representation of their actual annual income. A party’s circumstances may justify “imputing” an income to that party for support purposes.
Income is often imputed to parties who:
- Are underemployed and therefore are not meeting their earning potential, whether intentionally or unintentionally;
- Have unreported income (common in certain industries, including restaurants and construction businesses); or
- Have capital assets that could be used to make more income but are not doing so.
In situations where a party is a shareholder of a corporation or business owner, income earned by the corporation or business may be considered income to the party.
Whose Income Is Required?
Whether one or both spouses’ incomes must be determined depends on the type of support sought. For example, spousal support is intended to ensure a spouse’s finances do not suffer a disproportionate amount due to the relationship breakdown. As spousal support calculations consider the recipient spouse’s needs and financial means, both spouses must have their income determined through full and honest financial disclosure.
Some situations only require the payor parent’s income to be determined for calculating child support. However, other circumstances may require both parents’ income to be determined, including cases where:
- The parents split or share parenting time;
- The children have special or extraordinary expenses (“section 7 expenses”);
- One parent claims they will suffer undue financial hardship if the Child Support Guidelines are followed.
Balancing the Scales With Fair & Accurate Income Determination
Income determination helps both parties leave their relationship on similar financial footing and ensures that both parents support the children equally. Separated spouses can face serious legal consequences from the court if they misrepresent their income in determining their support obligations and entitlements. If a party fails to meet their legal duty to provide current, accurate financial information, a court can:
- Force the party to provide their income and financial information through an order for disclosure;
- Order support be paid retroactively, dating back to when the payor party’s income or financial circumstances changed;
- Order the payor parent to pay the other parent’s legal costs;
- Hold the payor parent in contempt of court if they breach an order for disclosure or support, punishable by fine or imprisonment;
- Impute a higher amount of income to a parent for the purpose of their child support calculation.
Determining income can be highly technical and requires a thorough understanding of Ontario’s family law legislation and common law. At GDH Family Law, we understand the complexities of income determination issues and can assist at any stage of your family law matter. Ensuring both parties’ incomes are properly calculated protects your legal position and preserves you and your children’s rights to financial support.
Contact GDH Family Law in Vaughan for Assistance with Income Determination
GDH Family Law is an innovative boutique law firm founded by lawyers who have dedicated their entire careers to the practice of family law. Our contemporary and personalized approach allows us to create bespoke legal solutions tailored to your family’s unique needs. We can help with income determination or other individual legal issues at various stages of your family law matter or provide full-service representation throughout the entire process.
GDH Family Law is based in Vaughan and represent clients throughout Maple, Concord, Woodbridge, Markham, Kleinburg, Richmond Hill, Nobleton, Toronto, Newmarket, Aurora, Brampton, Caledon, Mississauga, Etobicoke, North York, Thornhill, and King City. For a free initial consultation on your family matter, contact us at 416-535-6944 or reach out online.