Calculating income for child support is often misunderstood. Many times I have heard that we look only at “employment income”, “total income”, “T4 income” or “Line 150 income”. Unfortunately, this simplified method of calculating income is not correct; the Federal Child Support Guidelines requires an analysis of all income available from which child support can be made.
Here are some examples of income that are often ignored or misunderstood, resulting in the improper calculation of child support:
- Bonuses received from work,
- Investment income, including dividends and interest income,
- 100% of a capital gain (even though only 50% of the gain is reported for tax),
- Rental income,
- Employment incentives including car allowances, parking allowances, and reimbursements for meals, and
- Pension income.
Individuals who receive income from a corporation that they control represent the most complicated scenario for calculating income. The problem with these scenarios is that the owner of the corporation controls how the corporation spends its money. Deductions for business expenses, while perfectly legitimate for business and tax purposes, may not be legitimate deductions for child support purposes.
Most recently, in the case of Wildeman v. Wildeman [2014] A.J. No 1408, the Alberta Court of Queen’s Bench confirmed that the revenues and expenses of corporations require analysis as set out by the Federal Child Support Guidelines to properly calculate child support, so that children are not subject to receiving improper support. To do a proper analysis, full financial disclosure for the corporation is required. See my Resources section for a list of financial information required for this issue, as well as the other issues arising on separation.
Do you need help in determining income for child support? Give me a call.
