Imputing Income

Hamilton Spectator - November 2014

Question

How is my income determined if I have an obligation to pay child support or spousal support to my spouse?

Answer

In many cases, your income will be determined by reference to your personal income tax return from the most recent year.   This is most often the case where you earn only employment income and receive a T4 slip from your employer each year.   

If you are self-employed, a different set of factors and criteria may be considered.  For example, the Court has the ability to review, among other subjects, whether you receive unreported cash, whether personal expense are deducted by your business, whether there is improper income splitting with family member or new spouse, or whether there are excessive retained earnings each year in your business which could be paid out to you as income.

If the Court finds your personal income tax return does not reflect your true available income, it has the power to “impute” income to you for the purposes of calculating child and spousal support.    By way of example, your personal income return may show an income of $50,000 per year, but the Court could impute an income for support to you in the amount of $100,000 per year in the event that some or all of the above factors are applicable in your case. 

In more complex cases, a Court can go so far as assess whether you have control over the timing of stock options and/or bonuses and may impute income to you to include some or all of the bonuses and stock options in the year they became available, even though the options or bonuses were not realized until some point in the future.

In still other cases, if you are intentionally unemployed or underemployed, a court may impute a level of income to you that is deemed to be reasonable in the circumstances  given your age, health, and experience and history of employment earnings.     For example, you may not work, but the Court can impute an income of $20,000 per year if there is a finding you have chosen not to work and that you could work for minimum wage on a full-time basis.  

Imputing income to one or both spouses after separation is one of the most common and disputed issues arising after parties separate.   Determining income for support purposes can be a complex exercise that can have a major impact on the levels of support payable for many years to come.  The issue of proper income determination should be carefully considered and analyzed by both parties prior to signing to any settlement in relation to support.