Worried About Having Your Income Grossed-Up for Support Purposes? Here’s Some Court-Inspired Insight
As we have written before (such as “Court Disbelieves Father Claims About Income for Support Purposes – Concludes Lack of Job Search Means Father Already Earns a Good Living”; and “Husband Downgrades Job, Then Quits Altogether – But Support Stays the Same” about the concept of “imputed income” in spousal and child support calculations, where the court decides that a paying spouse is deliberately under-employed, all as a means of artificially reducing the income on which support obligations are calculated. The court’s remedy – which is authorized in Canadian family legislation – is to gross-up or “impute” income to the support-paying spouse, to bring it in line with the true reality of that person’s income or income-earning capacity (as the case may be).
Given the case-by-case, fact-driven nature of spousal and child support determinations, the precise mechanics of a court’s conclusion to impute income can be difficult to generalize. However, in a decision called Smith v. Smith, Justice Chappel took a stab at setting out some of the factors that should guide family courts in deciding whether to impute income in any given case.
Justice Chappel identified the following points and factors as being relevant:
• Where any party fails to provide full financial disclosure relating to their income, a court is entitled to draw an adverse inference of that lack of disclosure, and to impute income to him or her.
• Similarly, a court may impute income in a situation where it finds that a paying spouse is deliberately under-employed.
• In order for a court to impute income, it is not necessary to establish bad faith on the part of the paying spouse, nor that there was an attempt to thwart his or her support obligations.
• The amount of income that the court imputes is a matter of its own discretion; however, there must be some basis on the evidence for the amount that the court has chosen to impute.
Respecting under-employment by the paying spouse:
• A paying spouse has a duty to actively seek out reasonable employment opportunities that maximize his or her income potential in order to meet the needs of dependants.
• A self-induced reduction of income is not a basis on which a paying spouse can reduce his or her support obligations.
• Likewise, courts will not excuse or reduce the support obligations of an under-employed person who has persisted in un-remunerative employment, or who has pursued “unrealistic or unproductive career aspirations”.
• “Intentional under-employment” occurs where the paying spouse earns less than he or she is capable of, having regard to all the circumstances, and with the court assessing what is reasonable in the situation (taking account the age, education, experience, skills, health, and past-earning history of the paying spouse, as well as the amount he or she could reasonably earn if employed to full capacity).
For the full text of the decision, see: