Artificial Intelligence Child Support Family Violence & Abuse Tax Implications

More on the Ins-and-Outs of “Income”


More on the Ins-and-Outs of “Income”

I have written previously, What Counts as “Income” for Child Support? – Top 5 Concepts , about how “income” is an important factor in determining whether and how much child support a court will order one parent to pay to the other. For these purposes, the basic rule is that “income” is simply the amount reported to the Canada Revenue Agency (CRA) for the purposes of determining the annual federal income tax owed.

However – as we have come to expect with family law – some circumstances call for exceptions or differential treatment, designed to allow courts fairly address the special-case scenarios that can arise. Most often, these flow from the unique circumstances of the paying parent’s employment arrangement, or else from special financial circumstances or events that arise from his or her particular employment scenario. For example: Self-employment income is generally the amount that a person reports to CRA as income. However, the court will look at the reasonableness of the reported amount, usually by reviewing the individual’s records and – where there is a corporation involved – by reviewing the financial statements for the previous three years. This review will involve scrutiny of all aspects of the business: the expenses paid, as well as the payment made to employees, consultants and independent contractors.

Partnership income is another type of income that involves specific treatment. A parent who is self-employed but in a partnership – and who is taking a “draw” as partnership salary – will also have to satisfy a court that the money drawn out is reasonable in all the circumstances. If it is not, then a court may impute income to the parent; as before, this usually follows upon the court taking an income “snapshot” from the past three years in order to arrive at a fair figure.

Bonuses and overtime are also subject to a court’s scrutiny; the analysis begins by applying the general rule that such payments received by a parent from his or her employer will be included as income. However, adjustments can be made for exceptional years – for example where there was an unusually high bonus in a single year. Once again, the goal to for the court to make a fair assessment of the paying parent’s overall income despite any uncommon fluctuations.

Severance packages and termination pay are generally included as income as well, but there can be exceptions – not to mention differing treatment in terms of how the received payments are to be distributed across a multi-year period where the severance/termination is designed to serve as replacement income for a longer time-span. Once again, courts will often treat these scenarios on a case-by-case basis.

Do you have questions about whether an unusual or one-time influx of money constitutes “income” for child support purposes? We can help address your concerns.

Stay in Touch

Keep learning about the latest issues in Ontario family law! Subscribe to our newsletter, have our latest articles delivered to your inbox, or listen to our Podcast Family Law Now.

Be sure to find out more about the "new normal", by visiting our Covid-19 and Divorce Information Centre.

About the author

Russell Alexander

Russell Alexander is the Founder & Senior Partner of Russell Alexander Collaborative Family Lawyers.