Can retained earnings in a corporation be counted as income for child support?

Courts in Ontario can attribute some or all of a corporation's retained earnings (or pre-tax income) as available income to a payor who controls that corporation. This is a significant area of dispute in child support cases involving business owners, because owners often have the ability to choose how much to pay themselves and how much to leave in the company.

The analysis focuses on whether the retained earnings are genuinely needed for legitimate business purposes — maintaining operations, servicing business debt, funding capital expenditures — or whether they represent a discretionary accumulation that the owner could reasonably pay out to themselves. If retained earnings are excessive relative to the business's actual needs, courts may attribute a portion to the payor as personal income for support purposes.

There is no automatic rule about how much to include. Courts look at the business's financial statements, the nature of the business, typical practices in the industry, and any stated business rationale for retaining rather than distributing the funds. Having a forensic accountant or business valuator review the financials and prepare a report is often essential in these cases. If you are facing a claim based on corporate retained earnings, detailed and transparent financial disclosure and a clear business rationale for retained amounts give you the strongest position.