Imputed Income for Child Support in Ontario: When Courts Assign Income

Child support is mostly driven by the paying parent's income. That works well when the number on a tax return reflects what a parent can really earn. It works less well when a parent has cut back work, moved money around, or stopped providing documents.

This article explains what it means to impute income, the situations Ontario courts can look at, the limits on that power, and how disclosure fits in. It is general information, not advice about your own case.

What it means to impute income

To impute income means the court treats a parent as earning a certain amount for child support purposes, even if that is not what the parent's tax return shows. That amount is then used with the child support table to set support.

The starting point is normally the parent's actual income, which begins from the Total income line on the tax return. Imputing is a departure from that starting point, so a court needs a reason that fits within the Child Support Guidelines.

Situations where a court may impute income

Section 19(1) of the Ontario Child Support Guidelines lists situations where a court may impute income. They include a parent who is intentionally under-employed or unemployed, has diverted income, does not reasonably use property to generate income, unreasonably deducts expenses, or has failed to provide income information when legally required to.

The same section also reaches some tax-related situations. A court may look at whether a parent:

• is exempt from income tax
• lives in a country with significantly lower effective tax rates
• gets a significant portion of income from dividends, capital gains or other lower-taxed sources
• is a beneficiary under a trust

The word "may" matters. These are situations where the court has the power to impute, not automatic results. What a court decides depends on the evidence in each case.

When under-employment is reasonable

Not every drop in income is treated as a choice to avoid support. The under-employment ground does not apply where the reduced work is required by the needs of a child or by the parent's reasonable educational or health needs.

For example, a parent who returns to school or who has a health condition limiting work may be in a different position from a parent who simply quits a well-paying job after separation. Whether a particular situation fits the exception depends on the facts, and a lawyer can help you assess it.

Income can also be measured in other ways before imputing is even considered. Where the tax return figure would not be the fairest measure, for example because of irregular bonuses or overtime, the court may look at income over the last three years. Parents can also agree in writing on a parent's annual income, and the court may use that figure if it considers it reasonable in light of the income information provided.

Disclosure and what happens when it is withheld

Imputing income often comes up because documents are missing. A parent whose income is in issue must provide every personal income tax return and every notice of assessment and reassessment for the three most recent taxation years. An employee must also provide the most recent statement of earnings showing year-to-date pay.

Self-employed parents must also provide their business or professional practice financial statements for each of the past three years, and a breakdown of salaries, wages and benefits paid to others.

If a parent does not comply, the other parent may apply to court, and the court may draw an adverse inference and impute income. If a party fails to serve or file required financial documents, the court can order them to do so on motion and must also order costs. If someone disobeys an order, the court may make further orders, including costs, dismissing a claim, or striking out an application, answer or other document.

What to do next

If you think a parent's income is understated, or you are worried a court may impute income to you, start with the paper trail.

• Gather tax returns and notices of assessment for the last three years.
• Collect your most recent pay statement showing year-to-date earnings.
• If self-employed, gather three years of business financial statements.
• Write down why your work or income changed, and keep records of any child, health or education reasons.
• Respond to written disclosure requests on time and keep copies of what you send.
• Speak with a family lawyer before agreeing to an income figure or asking the court to impute one.

Frequently asked questions