The federal and provincial laws require that child support be paid in accordance with published “Child Support Guidelines.” The “Tables” or the “Guidelines” are based on the support payor’s gross yearly income and the number of children for whom support is payable. There is a chart or a table which determines the presumptive amount of child support which should be paid. The legislation also provides for additional support for “extraordinary” or special expenses incurred on behalf of a child. Child support is required by law from a biological parent or from a person who has consistently acted as a parent toward the child or children.
Financial disclosure is absolutely mandatory pursuant to the Guidelines and this requirement is strictly enforced by the Court. Financial disclosure includes the following:
- a copy of every personal income tax return filed by the parent for the three most recent taxation years;
- a copy of every Notice of Assessment or reassessment issued to the parent for the three most recent taxation years;
- where the parent is an employee, the most recent statement of earnings indicating a total earnings paid in the year to date, including overtime, or where such a statement is not provided by the employer, a letter from the parent’s employer setting out the information including the parent’s rate of annual salary or remuneration;
- where the parent is self-employed, for the three most recent taxation years:
- the financial statements of the parent’s business or professional practice other than a partnership, and;
- a statement showing a breakdown of all salaries, wages, management fees or other payments or benefits paid to, or on behalf of, persons, or corporations with whom the parent does not deal at arms’ length;
- where the parent is a partner in a partnership, confirmation of the parent’s income and draw from capital in the partnership for its three most recent taxation years;
- where the parent controls a corporation, for its three most recent taxation years:
- the financial statements of the corporation and its subsidiaries, and
- a statement showing a breakdown of all salaries, wages, management fees, or other payments or benefits paid to, or on behalf of persons or corporations with whom the corporation, and every related corporation do not deal at arms’ length, and
- where the parent is a beneficiary under a trust, a copy of the trust settlement agreement and copies of the trust’s most recent financial statements.
Non-arms’ length payments may be clawed back into net income for support purposes. The onus is on the payor to establish that the payment was necessary to earn the self employment income and was reasonable in the circumstances. Generally, self-employed persons are entitled to deduct expenses allowed under The Income Tax Act if such expenses were primarily incurred to gain or produce income. The personal component of these expenses will be disallowed for Guideline and support purposes. Alternatively, the Court can impute any unreasonably deducted expenses back into the self-employed person’s income.
Please Note: This information is not intended to contain advice specific to your situation. There are no cookie cutter solutions. After all, you are reading this information on the internet. Your situation is special and unique and you must be guided by specific individual advice from your Lawyer, Certified Financial Planner or Accountant.