Spousal Support and Self-Employed Income in Ontario

When one spouse owns a business or works for themselves, the question of how much they earn is rarely simple. Pay can be uneven, some spending runs through the business, and profit may stay inside a company rather than reach a personal bank account. That makes income the central fight in many support cases.

This article explains in plain language how income is generally approached for spousal support in Ontario, what financial disclosure is involved, and where the answers depend on the facts. Questions about add-backs, retained earnings and business structure are best confirmed with a lawyer and an accountant.

Where spousal support income starts

Spousal support is not a single formula applied to a pay stub. Under the Divorce Act, a court weighs each spouse's financial resources and needs, the length of the marriage, the roles each spouse played, care of the children, and whether the recipient can become self-sufficient within a reasonable time. Unmarried partners and separated spouses who do not divorce are governed by Ontario's Family Law Act instead.

When people use the Spousal Support Advisory Guidelines (SSAG) to estimate support, income starts from the definition of income in the Federal Child Support Guidelines. The SSAG are not law, but judges often base decisions on them and courts and lawyers often apply them under provincial law too.

The SSAG also do not decide whether you are entitled to support in the first place. Entitlement must be proven or agreed before the formulas apply.

Business income, corporate income and retained earnings

For a self-employed person, the starting point is usually what the tax returns and business records show. From there, the details matter. Non-taxable income must be grossed up, and capital gains and dividends use actual amounts.

Many business owners hold their business in a corporation. A court may attribute pre-tax corporate income to a payor for child support, but is less willing to do so for spousal support. That does not mean corporate profit is ignored. Whether particular expenses should be added back, or whether profit left in the company should be counted, depends on the facts of the business, and a lawyer and an accountant can tell you how those issues are likely to be viewed in your situation.

• Personal expenses paid through the business
• Profit kept in a corporation instead of paid out
• Dividends or capital gains the owner chooses to take or not take
• Income that rises and falls from year to year
• Cash or informal income that does not appear in the records

These are the areas that tend to generate disagreement, so expect questions and requests for backup documents.

Disclosure: proving what the business earns

When a support claim is made in a Form 8 application, a Financial Statement is needed: Form 13 for support-only claims, or Form 13.1 where property and support are both claimed. A Certificate of Financial Disclosure (Form 13A) is also required, and financial disclosure documents are needed when a support claim is made.

The same honesty standard applies outside court. A separation agreement can set support without going to court, but it must be understood, based on complete and honest financial disclosure, and not signed under pressure, or a court may set it aside. If you are the self-employed spouse, incomplete disclosure can undo an agreement later. If you are the other spouse, it is worth checking that the business records you receive are complete before you sign.

The exact documents to attach to the forms can change, so check the current forms or ask a lawyer what is needed in your case.

Why calculators can mislead

Justice Canada says online calculators may help only with simple calculations, and complex cases, such as those with tax effects, usually need dedicated software. Ontario's free online SSAG calculator considers only employment income and does simple calculations. A business owner's income is often exactly the kind of case that falls outside those limits.

When business income drops or is unpredictable

Business income often changes. If a payor's income drops significantly, the SSAG ranges move down, and ability to pay can reduce the range to zeros across the board. If the drop may not be permanent, a court may order disclosure of future re-employment or add a review term. Voluntary under-employment may also be an issue.

Changing an existing order requires a material change in circumstances. The SSAG guide describes the test as a change that is substantial, continuing and that, if known at the time, would likely have resulted in a different order. Ontario.ca lists changes in income among the triggers for reviewing support, although an agreement or order may already address the point or set a review date.

What to do next

• Gather several years of tax returns, notices of assessment and business financial statements.
• Collect corporate records if the business is incorporated.
• Note which expenses are personal and which are genuinely for the business.
• Read any existing agreement or order for clauses about income disclosure or review.
• Speak with a lawyer, and often an accountant, before agreeing to an income figure.

Where the other side has not provided full records, ask for them in writing and keep copies of every request.

Frequently asked questions