Income Imputation & Underemployment

PAY NOW. OR PAY LATER.

In determining what a payor's income is, the Court uses the individual's gross income. For individuals who receive a salary and/or wage, the individual's income as reflected on line 150 of their Personal Income Tax Return is used to determine the appropriate income upon which child support would be paid.

In situations where an individual is self-employed or an individual who is paid by a corporation in which he or she has an interest, the determination of his or her income is more involved. The Court still looks at their personal income tax return and the amount reflected by line 150. However, in situations where an individual has some interest in a company, it is possible for the Court to add back to that individual's income the pre-tax income of the corporation. Furthermore, when an individual pays other people through his or her corporation, and if he or she does not have an "arm's length" relationship with that individual, some of that money can be added to the individual's income to determine the appropriate amount of child support. It is important to seek the advice of a lawyer and an accountant when dealing with individuals who are either self-employed or employed through corporations which he or she has an interest. Those individual's income is not necessarily accurately reflected on the Personal Income Tax Return.

At times, a Court can "impute" income or attribute income to an individual in certain situations. This occurs when:

  • An individual is intentionally unemployed or underemployed.
  • An individual does not pay income tax on their income (i.e. they work outside of Canada).
  • Income is being diverted.
  • The individual has failed to disclose all of the relevant financial information.
  • The individual is unreasonably deducting expenses from his/her income.
  • Set salary / dividends on advice of an Accountant for income tax or benefits purposes.
  • Other relevant circumstances.

At GDE FAMILY LAW, we use our capability and experience to ensure that if the opposing party chooses to engage in underemployment, an adequate and fair income shall be imputed for the purposes of child and spousal support.