Spousal Support Advisory Guidelines: The Revised User's Guide

6 Income (SSAG Chapter 6)

The starting point for the determination of income under the Spousal Support Advisory Guidelines is the definition of “income” under the Federal Child Support Guidelines. For the most part, the income issues are the same as those for child support purposes, i.e. interpreting the provisions of sections 15 to 20 of the Child Support Guidelines and Schedule III.

(a) Differences in “income” for spousal support

There are some notable differences in “income” for spousal support purposes under the Advisory Guidelines, as compared to the income of a spouse determined for child support purposes.

  • Social assistance is not income for spousal support purposes, whatever its name, even if it’s called Ontario Works or Ontario Disability Support Program (ODSP) or Alberta’s Assured Income for the Severely Handicapped (AISH) or some other confusing name (SSAG 6.2). ODSP still appears to fool some lawyers and judges, who erroneously treat it as income for the recipient and thus understate the spousal support range. For examples of correct treatment of ODSP and social assistance, see Fountain v. Fountain, 2009 CarswellOnt 6342 (S.C.J.); Quattrochiocchi v. Quattrociocchi, [2008] O.J. No. 5341, 2008 CarswellOnt 7977 (S.C.J.); and Stano v. Stano, 2014 BCSC 1677.
  • Under the with child support formula, the Child Tax Benefit, the Universal Child Care Benefit (UCCB), the child portion of the GST credit and any other child benefits for the children of the marriage are treated as income for spousal support purposes, unlike for child support (SSAG 6.3, 6.4). The software automatically computes these benefits and thus these benefits should NOT be calculated manually and included as income, as that will lead to double-counting.
  • Update: There will soon be a significant change in child benefits, as the new federal government intends to roll the UCCB, the Child Tax Benefit and the National Child Benefit Supplement into a single, increased Canada Child Benefit, effective July 1, 2016. This new benefit will also have a different phase-out or claw-back rate as the recipient’s income rises. This change will have an impact upon the with child support formula.
  • One child benefit issue has arisen recently, namely whether the Canada Pension Plan Disability child benefit should be included in a spouse’s income for spousal support purposes. CPP pays a separate child portion/benefit to the custodial parent, on account of the disability of the child’s parent. In our view, the answer should generally be “yes”, consistent with the SSAG treatment of other child-related benefits for the children of the marriage/relationship. In many cases, it will be the lower-income primary parent who will be reporting this income and its inclusion will reduce spousal support payable. In some custodial payor cases, the CPP child benefit will be paid to the higher-income custodial parent. In one such case, Janzen v. Janzen, 2014 BCSC 1374, the court chose to exclude the benefits of $5,400/year for the two children from the payor’s income, after a careful analysis of the issues. In our view, the better approach would have been to include the CPP Disability child benefit in the payor’s income (with a parallel adjustment for his payment of s. 7 expenses).

(b) Timing of income

In the SSAG(6.7), we state: “The Advisory Guidelines start from the practical position that the relevant time for determining the incomes of the spouses is the date of the hearing or the date of the agreement, at both interim and initial stages.” Incomes can and do change in the period between separation and the date at which support is initially being set, but usually only in minor ways. A long delay in the support claim or significant changes in incomes before the initial order/agreement (such as a significant increase in the payor’s income or a significant reduction in the recipient’s income) may complicate the analysis in some cases (see below under “Changing Incomes”).

The issue of what incomes to use in situations of variation and review is dealt with below under “Variation and Review” and “Changing Incomes”.

(c) Imputing income

Everyone wants to impute a higher income to the other spouse, either to increase or decrease spousal support. Once we use income-based advisory guidelines, it is obvious that a higher income for the payor will move the range upwards, or a higher income for the recipient will move the range downwards. Attempts to impute income have now become common, often with little evidentiary foundation.

Section 19 of the Child Support Guidelines is often the basis for these imputing claims. It is worth remembering that s. 19 is a mixture of two kinds of “imputing”: a number of clauses that can be described more accurately as “attributing” income to the payor, income that the payor actually receives in some form, as contrasted to s. 19(1)(a), for example, where a court can truly “impute” income to the payor, even if he or she is unemployed or underemployed. Most of s. 19(1) focusses upon attributing income to a spouse, in an effort to treat various types of income and situations so as to put the spouse on an equal footing with a wage or salary earning employee, i.e. s. 19(1)(b) to (e) and (g) to (i). True imputing takes place under s. 19(1)(a) (and possibly under s. 19(1)(f)), where a court must determine the hypothetical income a spouse might earn.

There must be an evidentiary basis to attribute or impute income under s. 19(1). Where a spouse is not employed, but should be working part-time or full-time under s. 19(1)(a), it is straightforward to impute a minimum wage income, as a court can take judicial notice of the minimum wage in the jurisdiction. To prove that a spouse could earn more than the minimum, evidence will be needed. The case law under s. 19(1)(a) will be helpful, e.g. Drygala v. Pauli (2002), 61 O.R. (3d) 711 (Ont.C.A.).

In many cases, it will be difficult to prove how much a spouse ought to be able to earn. It may be easier to just argue location within the range for amount, to go lower in the range if the recipient’s income is in issue or to go higher in the range if it is the payor’s income.

In many cases where not much imputed income is involved, imputing additional income will not move the range much, which means considerable overlap between the range for actual income and the range for the desired imputed income, as is discussed in the next section. Or, where the payor has a high income, imputing a part-time or full-time minimum wage income to the recipient will not move the range much. In these instances, it might be better to concede the time-consuming proof of income, and then argue location in the range.

(d) Using alternative incomes, to estimate ranges

In some circumstances, it may be difficult to ascertain the precise income of a payor or a recipient. There may be uncertainty about income, or difficult judgments in imputing income, or inadequate evidence at the interim stage. One way to solve this common problem is to estimate different ranges for amount, based upon alternative income hypotheses. Usually there will be some overlap in the ranges, which can help in choosing a specific amount.

The B.C. Court of Appeal accepted this approach in upholding the variation decision in Beninger v. Beninger, 2009 BCCA 458. In a case above the ceiling, the trial judge had considered ranges for incomes of $366,400 and $416,400, thanks to an uncertain bonus for the payor, and then opted for an amount at the low end of the higher-income range, which fell in the middle of the lower-income range.

For an excellent example of this approach, in a high-income interim support case, see Saunders v. Saunders, 2014 ONSC 2459. For other interim examples, see Kozek v. Kozek, 2009 BCSC 1745 (Master), affirmed on appeal 2009 BCSC 1663 (dividend income); Muzaffar v. Mohsin, [2009] O.J. No. 4005 (S.C.J.) (husband self-employed) and Stork v. Stork, 2015 ONSC 312

One other example would be those cases where a court debates whether to impute income to a support recipient, or how much, in a “self-sufficiency” case. In the same fashion as for the payor, alternative incomes will usually generate overlapping ranges. Where the income disparity is great, there will be considerable overlap, often simplifying the outcome, as was the case in Teja v. Dhanda, 2009 BCCA 198 (trial judge considered ranges for wife’s incomes of $25,000 and zero). See also P.D.E. v. A.J.E., 2009 BCSC 1712 (wife underemployed, ranges determined for incomes of $20,000, $40,000 and $50,000, terminating step-down order made).

(e) Grossing-up non-taxable income

Under the without child support formula, which uses gross incomes, any non-taxable income will generally have to be “grossed up”, either by correctly inputting the income data with the software or by manual calculations (if software is not being used). If the inputs are done correctly, the software will do the grossing up calculations. The same is true for non-taxable income under the custodial payor or adult child formulas. Income can be legitimately non-taxable, such as workers’ compensation or income earned on reserve or long-term disability payments, or it can be income that is improperly not reported for tax purposes, such as tips or cash payments for work. Both forms of non-taxable income must be grossed up to do the without child support formula calculations, in order to treat earners of gross income and earners of non-taxable income on an equal footing.

The rest of the with child support formulas use net income rather than gross income to calculate spousal support, but you still have to input the income data correctly in the software. Any non-taxable income will be directly inserted into the net income calculations for spousal support by the software for these formulas. But remember that any non-taxable income will have to be grossed up by the software to determine the correct amount of child support.

Where a substantial portion of the payor’s income derives from legitimately non-taxable sources, you may have to use the “non-taxable income” exception, discussed below under “Exceptions”.

(f) Quick tips and alerts in determining income

Apart from these major issues in income determination, there are some minor ones that should be noted, both manually and in the use of software.

  • Most common simple error? Failing to deduct union dues from Guidelines income, as is permitted under s. 1(g) of Schedule III of the Child Support Guidelines.
  • Remember to check the other “adjustments to income” of Schedule III.
  • Too often lawyers and others input all forms of income into the default “employment income” category, without much thought. One example would be the non-taxable income discussed in the section above. Under the without child support formula, there are fewer other sources of error, as this formula uses gross income. But there is still room for error from Line 150 income: for example, you need to use actual amounts of capital gains and dividends from taxable Canadian corporations, as directed by ss. 5 and 6 of Schedule III.
  • Under the with child support formula, there is much more room for error in inputting income, as the formula is a net income formula and thus is sensitive to each form of income, as different taxes, deductions, credits, CPP and employment insurance contributions will attach to different kinds of gross income. For example, a person receiving CPP or any other form of pension income will not pay CPP or EI contributions (which are deducted from employment income).

(g) Can a payor have “two incomes”?

Another set of difficult “income” issues can be succinctly characterized as “two incomes”, one for child support and another, different income for spousal support. The question is not, “can a payor have two incomes?”, but really “in what circumstances should a payor have two incomes?” These issues are difficult because they are not just about “income”, but about more fundamental principles of support.

Here are some examples of circumstances where the payor can have one income for child support and a different one for spousal support:

  • Where the payor experiences a post-separation income increase, there is no question that the child should share fully in any increased income under the Child Support Guidelines. The same cannot be said for spousal support, as there is a threshold entitlement question to be considered, namely whether the recipient spouse should share none, some or all of the payor’s increase in income (discussed at SSAG 14.3 and below under the heading “Changing Incomes”). A court can find that child support should increase, but not spousal support under the Advisory Guidelines. For good examples of these issues, see Sarophim v. Sarophim, 2010 BCSC 216 (income for spousal support excluding income from increased teaching post-separation) and Judd v. Judd, 2010 BCSC 153 (full income increase included after careful discussion).
  • Section 14 of the Child Support Guidelines fixes a very low threshold for an application to vary child support, on the view that child support should readily adjust up and down with the payor’s income, at least for table amounts, often on an annual basis. By contrast, the threshold for variation is more demanding for spousal support and some judges will thus attempt to determine more of a “steady-state” income, smoothing out fluctuations or predicting anticipated increases: e.g. K.D. v. N.D., 2009 BCSC 995 (fluctuating income).
  • Where the payor’s income exceeds the “ceiling” of $350,000 per year, a court will usually order the formulaic table amount of child support for payor incomes up to $1 million per year, but a lower income can be used for purposes of the Spousal Support Advisory Guidelines (SSAG 11.3). For an example, see Dickson v. Dickson, 2009 MBQB 274 (child support income for 2005-07 $520,872, but $350,000 used for spousal support, one small error in using higher amount of actual child support in calculating spousal support range at $350,000, rather than child support amount for $350,000).
  • There are often strong policy reasons to impute income to a payor for child support purposes, for the child to obtain the full benefit of the earning capacity of the payor, while the rationale is much weaker for spousal support. For an example of this, see Martin v. Orris, 2009 MBQB 290 (various corporate payments to family members and expenses treated as not reasonable to deduct from child support income, but reasonable to recognize such long-standing payments in determining income for interim spousal support). Similarly, a court may be prepared to attribute pre-tax income from the payor’s corporation as income for child support purposes under s. 18 of the Child Support Guidelines, but less so for the determination of spousal support.
  • Finally, there may be situations where the inter-relationship between property division and spousal support for spouses may mean a different, and lower, payor income is used for spousal support. See Klefenz v. Klefenz, 2015 NSSC 196 (payment on account of capital in share transaction included for child support, but not for spousal support). For example, if stock options are valued and divided as part of the property divisions, the same stock options may not be treated as income for spousal support purposes, even in cases where the stock options might be considered as income for child support purposes. On such benefits as stock options and bonuses, see Kenneth Cole, “The Dual Character of Employment Benefits” (2009), 28 Canadian Family Law Quarterly 95.

(h) Other assorted income issues

Not covered here are a variety of “income” issues, issues which receive specific treatment under a number of other headings in this User’s Guide (with the relevant sections of the SSAG also referenced below). These issues will just be flagged here:

  • Ceilings and floors: incomes above the “ceiling” and below the “floor”, dealt with below under “Ceilings and Floors” (SSAG 11).
  • Non-taxable payor income: there is an exception where the payor derives all or most of his or her income from legitimately non-taxable sources, dealt with below under “Exceptions” (SSAG 6.6 and 12.8).
  • Post-separation income increase of the payor: this important and difficult issue is dealt with below under “Changing Incomes” (SSAG 14.3).
  • Post-separation income reduction of the recipient: below under “Changing Incomes”.
  • Delayed claims: also dealt with below under “Changing Incomes”.
  • Imputing income for self-sufficiency: dealt with below under “Self-sufficiency” (SSAG 13.2).
  • Prior support obligations: an adjustment to income is required under this exception, often done automatically by software once the data is inputted, dealt with below under “Exceptions”.
  • Boston and double-dipping: where a pension has already been divided as part of the property settlement, there may have to be an exception made and income adjusted, considered below under “Retirement”.
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