Me Alicia D'Alessandro
Alicia D’Alessandro focuses her practice on family law, particularly child custody, divorce, support and filiation. Thorough and caring, she supports her clients with a human, structured approach tailored to their circumstances.
View profileBook an appointmentIn family law, when it comes time to calculate child support, several factors come into play, including the income of the people involved. What can you do when a parent’s reported income does not reflect their real income? What are the different scenarios that affect the child support calculation? Our family lawyers in Québec City and Lévis explain.
Reported income versus real income
It is commonly believed that child support is calculated only on the basis of the income each parent reported to the tax authorities for the previous year. In fact, the rules are more complex.
Reported income
As a general rule, the income used to calculate child support is indeed the income reported to the tax authorities. This applies, for example, when the parent is an employee and receives no fringe benefits from their job. This is the simplest scenario.
Real income
In other situations, a parent may have notional income imputed to them for the purpose of calculating child support. Imputing income is necessary when a parent’s reported income does not reflect their real income.
Do you have questions about your situation? Contact one of our family lawyers today.
Special cases
Business shareholders
There are several tax advantages that lead individuals to incorporate. For example, when a parent owns a business, they may decide, for tax reasons, to pay themselves a lower salary and leave the profits in the corporation. The corporation would then have significant amounts in retained earnings. In practice, a portion of these earnings could be imputed to the parent’s personal income.
The extensive case law on this issue shows that the courts may impute between 5% and 100% of a business’s retained earnings to the parent’s income. Each case must be analyzed based on its circumstances.
The courts will also analyze the various benefits that a parent who owns a business may enjoy. Examples include using a vehicle registered to the business, or using the business credit card for everyday expenses such as groceries, personal purchases or travel. The value of these benefits could be converted into income.
Self-employed workers
For tax purposes, self-employed workers can reduce their income through deductible expenses. However, not all expenses that are deductible for tax purposes are eligible when determining a parent’s income to calculate child support. In practice, certain deductions considered personal, meaning expenses that were not used to operate the business, may be added back to a parent’s income.
Employees who receive various benefits
Similarly, when a parent is an employee and works for a company that offers them several fringe benefits, the value of these benefits could be converted into income. Examples include:
- Paid absences or leave upon retirement
- Employer contributions to an RRSP held by the parent
- Employer contributions to an insurance plan
- Allowances for employment-related expenses (for the portion that exceeds actual expenses)
- Use of a car or mileage allowance
- Parking allowance
- Travel allowances
- Repayment of a shareholder advance
- Remote-location or night-work premiums
Keep in mind, however, that each case is assessed individually, based on the circumstances.
Parents who receive help from their own parents
A parent may receive benefits from their own parents.
Example: Jean is the son of Armand and Rita. They pay Jean $1,000 a month to help him out. The calculation of the child support Jean must pay for his own son, Jacob, will have to take this monthly payment into account.
The courts have held that recurring financial help from a parent can be considered income. Also, when the parents pay for groceries, provide housing or cover various everyday expenses, a value could be assigned to these “services,” and that value could be imputed to the income of the parent receiving them.
Drop in income or job loss
A work stoppage, a drop in income or a job loss can affect the child support calculation. The rule is then that the income used to calculate child support is the income for the current year.
However, when this income does not reflect a parent’s real income, section 9 of the Regulation respecting the determination of child support payments allows the use of the parent’s expected income for the next 12 months.
Career change
The courts have held in the past that a parent who wants to improve their professional situation cannot be faulted for changing careers or going back to school. In such a case, a drop in income could justify recalculating child support based on that parent’s current income.
Note that the court must be convinced that the career change is genuine and that it is not being made to avoid support obligations.
Parents with no income
If one of the parents has no income, the courts will be cautious when calculating child support. If there is no valid reason why this parent is not in paid employment, income may be imputed to them, generally equivalent to a full-time minimum wage.
What happens to a parent who voluntarily quits their job to avoid paying child support they consider too high? The case law consistently holds that a parent who knowingly chooses not to work, without a valid reason, when they are able to do so, may have notional income imputed to them based on their earning capacity.
For example, a parent who worked as a nurse could have notional income imputed to them based on a nurse’s average salary.
Do you recognize yourself in one of these cases? Do you have questions about your situation? Contact one of our family lawyers today.
Calculating support: gross or net income?
All income and employment benefits a parent receives must be taken into account when calculating child support. This includes, in particular, real income, whether taxable or not, undeclared (under-the-table) income and various fringe benefits from employment. The calculation is based on total gross income, with a few rare exceptions.
One example is a member of the military who receives a non-taxable allowance during a deployment. The net amount of this allowance will be grossed up to gross income, as if it were a taxable salary.
Contact our family lawyers
If you are dealing with family issues related to calculating child support, do not hesitate to contact the family lawyers at Verreau Dufresne Avocats today.
In particular, our lawyers can:
- Answer your questions about child support and the income taken into account;
- Analyze your situation and the solutions available to you;
- Assess the possibility of an amicable agreement with your former spouse, which will save you from having to go to court;
- Draft your court application to request, change or cancel child support, or to contest such an application made against you;
- Prepare your evidence for a court hearing:
- By selecting the documents and other evidence needed to convince the court of your position;
- By selecting the witnesses needed for your case and preparing them for the hearing;
- Represent you in court to assert your rights.
Note: The information above is general in nature and does not constitute legal advice. For advice on your particular legal situation, feel free to contact one of our lawyers in Québec City or Lévis.
