Support: When Payments Overwhelm
As a greater number of Canadian Children are growing up in “separated families”, a greater number of parents are paying or receiving child support. Child support can be a source of tension between parents. It is common for the support payer to feel that he or she is “paying too much.” In some occasions, the payers finds the support obligation financially crippling. This article will explain how the Child Support Guidelines work.
What are the Child Support Guidelines?
The Federal Child Support Guidelines are a regulation that was enacted by the Canadian government in 1997, although the tables that set out how much “base child support” should be paid were revised in May 2006. Pursuant to Section 15.1 (3) of the Divorce Act, a judge hearing a divorce case must order child support in accordance with the Federal Child Support Guidelines. Court cases that do not involve a divorce are governed by provincial legislation. However, every province in Canada has its own Child Support Guidelines. The provincial guidelines are essentially identical to the federal guidelines, although the provincial guidelines have sections to address when one of the parents is receiving social assistance. The law of every province requires the courts that are not granting a divorce to order child support in accordance with the child support guidelines of each province.
The Child Support Guidelines are most frequently applied to set the amount of child support that is paid between natural or biological parents of a child or children. However, people other than biological parents can be required to pay support. In Ontario any “person who has demonstrated a settled intention to treat a child as a child of his or her family”, except a foster parent, can have an obligation to pay child support. This means that a stepparent or another person who has been “acting like a parent” to a child can be required to pay child support. However, the law does not apply exactly the same to biological parents as it does to “other parents.” Biological parents must almost always pay child support according to the “tables”, which will be discussed below. Section 5 of the Child Support Guidelines both federal and provincial gives the Courts descretion to move away from the “tables” for non-biological parents, especially where a biological parent is already paying child support.
The court can also stray away from ordering child support as set out in the “tables” when there is a “shared parenting situation”. This is a situation where the children spend close to an equal amount of time in the care of each parent. The actual cut-off is that the children must spend at least 40 percent of their time with one parent. In “shared parenting situations” the court is supposed to divide all the costs of parent a child between the parents in an amount that reflects the income of each parent.
Under Canadian law, every parent to a child has an obligation to support that child in accordance with the Child Support Guidelines. That obligation exists at least from the moment when parents separate. A parent who is not caring for a child at least 40 percent of the time ought to start paying child support in accordance with the “tables” immediately. The Child Support Guidelines tables can be found online at http://www.justice.gc.ca/en/ps/sup.
How the Amount of Child Support is Calculated
The premise behind the the Child Support Guidelines is that the amount of child support that a court would order a parent to pay, is predictable and easy to calculate. Section 3 of the Child Support Guidelines says there are two components to Child Support Payments:
(a) The base or the table amount
(b) The contribution towards “special and extraordinary expenses”.
The base or table amount is a monthly amount that is set out in the tables that are a part of the Child Support Guidelines. Once the parties know the payer’s annual income, they simply turn to the appropriate table and find the required child support for that income. There are different tables for different numbers of children from one to “six or more.” There are also different tables for each province.
The basic principle behind the tables is that the monthly support amounts reflect the amount that a parent at each level of income would otherwise spend on their child. There are different tables for each province to reflect that the cost of raising a child varies across the country. The base amount of child support should be affordable for a person making the payer’s income. It is impossible to convince a judge that the table amount is not appropriate except in a very limited number of circumstances. Those circumstances are where the child is over 18, the payer’s income is very high, the parent has an unusually high number of debts from supporting the family during the period of cohabitation, the parent has unusually high expenses in relation to exercising access or the payer has a legal obligation to support another child or adult.
The income of the recipient is not a factor in determining the base amount of support except in “share parenting situations.”
The second component of child support award is the payer’s contribution to “special and extraordinary expenses.” These are sometimes called “Section 7 Expenses” as Section 7 of the Child Support Guidelines provides the method for determining this portion of monthly child support payment.
“Special and extraordinary expenses” are just that. They are expenses that are out of the ordinary for the household combined income of the parties. The most common of this type of expense are for expenses like those associated with the child’s participation in a sport at a higher level. Parents know that children who demonstrate skill in a sport such as hockey or gymnastics and pursue that sport to the full extent that their skill allows, cause their parents to incur substantial expenses. When that child’s parents are separated, their parents are expected to share those types of expenses in proportion to their incomes. What constitutes a special and extraordinary expense does change with the parents’ incomes. As the parents combined income goes up, so does the amount that expense must be to be considered special and extraordinary.” On the other flip side, for parents with lower incomes, some expenses are simply unaffordable if the parents cannot afford to bear an expense for their child, then it will not be a “special and extraordinary expense.” Obviously, this is an area where there is lot of fluctuation and cases really do turn on their own set of facts so it is important for a person to speak to a lawyer if they are facing a claim, or think they may have a claim, for special and extraordinary expenses.
Since both the base and the special expenses portion of child support un the Child Support Guidelines take into account what is “affordable” at each level of income, it is not the amount of support that the guidelines require people of certain incomes to pay that causes parents to run into trouble, but how their income is calculated.
The Calculation of Income and How Payers Can Get Into Trouble
Most litigation over child support is about what a payer’s income is for child support purposes. In many cases, the court finds a payer’s income to be higher than the payer thinks it is. This results in a higher child support payment than the payer thinks is fair.
For the vast majority of child support payers, the determination of their income is a very easy and straightforward process. These are the people who are employees whose income is as reported by their employer on payer’s T4 slip. Where all of a person’s income comes from employment, then the determination of their income for child support purposes is very easy.
For most payers, for their income child support purposes is the same as their income as reported on line 150 of their income tax return. There are two main exceptions to this rule. The first is where a payer is earning less income than he or she is capable of earning. The second is where the payer is self-employed or has other mechanisms available to him or her to reduce his or her taxable income, while not reducing the money that the payer has available to spend. Section 19 of the Child Support Guidelines allows a judge to find that a person’s income for child support purposes is higher than their income as reported on line 150 of their income tax return.
A person’s income for tax purposes is not necessarily their income for support purposes. Where a person’s education, skills and experience suggests that that person can be earning more income than he or she is, a judge can order that that person pay child support in an amount that reflects what they could be earning with their education, skills and experience. Some people reduce their income simply to avoid child support. This is a self-destructive behaviour as child support is always a portion of a person’s income so an increase in income should never be completely consumed by an increase in child support. Judges have no problem in ordering them to pay child support based on what that person could be earning.
The Child Support Guidelines also recognize that people who are self-employed, have family businesses or trusts, or who have other means to decrease the amount of income that they report on their Canadian income tax return, should not use line 150 of that return to calculate the amount of child support that they owe. The principle behind the Child Support Guidelines is that all people of the same income should be paying the same child support. The Child Support Guidelines expects that people who have the same after-tax income will spend the same amount on their children. When people have mechanisms to reduce their taxable income, the court will look at how much “cash” the parent has received and then figure out what income that person would have to earn as a regular employee to receive the same amount of “cash.” The court will then use that calculated number as that parent’s “income” and use it to calculate child support. Many self-employed individuals structure their business so that they minimize the number that appears as “taxable” income on their income tax return. Those people should not be surprised if the court bases child support on a level of income that is higher than what their tax return says.
Where a parent who owes child support refuses to provide financial disclosure, the court will not wait to make an order until after it has full financial disclosure. Instead, the court will “guess”. The court may “guess” high so as it prevents the children from suffering a financial disadvantage as a result of their parents’ failure to comply with the court’s requirements.
Child support is supposed to be recalculated every year based on the parents’ most recent income information. Separated parents have an obligation to keep the other parent informed about their income every year. If a parent’s income goes up and he or she does not tell the other parent, the courts have no difficulty in ordering that parent to pay the support that he or she ought to have been paying all along pursuant to the Child Support Guidelines. However, the converse is not true if a parent’s income goes down and he or she does not tell the other parent, the courts are not particularly inclined to find that that parent “overpaid” where that parent did not provide the required background information.
It is by the “imputing” of income that a payer can find that he or she has to pay child support in an amount that is more than he or she feels she can afford.