Section 3 child support is usually straight forward to calculate, because of the Federal Child Support Guidelines, which sets guideline amounts of child support based upon how many children the parties have, whether the parties have primary or shared parenting, and the income of the payor parent (or both parenting if it’s a shared parenting regime). However, child support calculations can become complex and are based upon accurate and complete financial disclosure. For example, if a payor parent makes well over $150,000 or if the payor parent receives his or her income from a company or partnership.
If a payor parent is a shareholder, director, or officer of a corporation, his or her annual income on his or her tax return may not necessarily reflect the payor parent’s actual income. Under section 18(1) of the Federal Child Support Guidelines, the Court may consider further evidence beyond the taxable income if it is satisfied that the payor’s annual income does not accurately reflect the money available to the party to pay child support. A common scenario that arises is a payor parent, who receives his or her income from a company, will claim expenses in determining his or her taxable income. It can be difficult for the other spouse to ascertain whether or not an expense is really reasonable. Under a standard Notice to Disclose, the parent who has 1% or more interest in a privately held corporation is obligated to provide:
The Alberta Court of Appeal recently released a decision, Cunningham v. Seveny 2017 ABCA 4, which dealt determining who bore the burden of proof in showing certain business expense deductions are reasonable for purposes of calculating income for child support. Unsurprisingly, the Court found that as a general rule, the shareholder should provide at least the following:
If you own a company or are separating from someone who owns a company, it is a good idea to speak to a lawyer to determine financial disclosure obligations and ensure you have a firm grasp on each parties income so that support issues may be dealt with properly. If you have questions about disclosure or child support, our mediators can assist you. Connect with us today to learn more.