Establishing a Dentist's Real Income for Child Support in Stratford

The situation

Deepa and Sanjay met during their professional training and built a life together over eleven years without ever marrying. Deepa worked as a specialist physician, drawing a salary that was straightforward to document, taxed at source, and visible on a single T4 slip every year. Sanjay owned a dental practice in Stratford, structured as a professional corporation, which let him leave a portion of the practice's earnings inside the company rather than paying it out to himself as personal income. They had a son together, Antonio, and when the relationship ended after more than a decade, the two adults who had shared a household, a mortgage and a child now had to work out what Sanjay owed toward raising him.

Because Deepa and Sanjay had never married, their separation did not trigger the equalization of property that applies to married spouses under Ontario's Family Law Act. But child support is a different obligation entirely — it flows from parentage, not marital status, and applies to common-law parents exactly as it applies to married ones. Deepa's own income, while substantial, was fully disclosed and easy to verify. Sanjay's tax return told a much smaller story than the life she had watched him live for eleven years: renovations to the practice, a second vehicle for the business, and retained earnings sitting inside the corporation that never touched his personal return at all. She came to Treadstone Law needing to know what the law actually treated as Sanjay's income when a self-employed parent runs that income through a corporation he controls.

The legal problem

Ontario's Child Support Guidelines calculate support primarily from the paying parent's income, most often the figure reported on their personal tax return. For a professional who owns their own corporation, that figure can be a poor proxy for what they actually control and spend. A dental practice generates revenue, pays its expenses, and can then choose to distribute the remaining profit to its owner as salary or dividends — or leave it inside the corporation as retained earnings, taxed at the lower corporate rate and untouched by the owner's personal return. Sanjay's corporation had done exactly that for several years running, holding back a meaningful share of the practice's annual profit rather than paying it out, while the practice also covered a vehicle, a portion of his phone and internet, and other costs that blurred the line between business expense and personal benefit.

The guidelines account for this. Where a parent is a shareholder, director or officer of a corporation, a court can look past the personal tax return and attribute to that parent some or all of the pre-tax income of the corporation, particularly income the corporation retained rather than distributed, if keeping it inside the company was not reasonably necessary to the business. The guidelines also allow personal expenses paid by a corporation to be added back to a parent's income where they conferred a personal benefit beyond what a genuine business need required. Neither adjustment happens automatically. Both require a court, or a negotiation conducted with the same rigour a court would apply, to work through several years of corporate financial statements, not just a personal tax return, and to separate what the practice genuinely needed to retain from what amounted to income Sanjay was simply choosing not to take.

The complication for Deepa was scale. A dental practice is a real, ongoing business with legitimate reasons to hold back some earnings — equipment purchases, staffing costs, a buffer against a slow year. Not every retained dollar was income Sanjay was hiding from support; some of it was genuinely needed to run the practice. Sorting the two apart required financial detail Deepa had never had reason to collect during the relationship, and a process that could easily become as expensive as the amount of money in dispute if it were allowed to run unchecked.

What we did

1. Requested corporate and personal financial disclosure together. We asked for three years of the practice's financial statements, its corporate tax returns, and Sanjay's personal returns and notices of assessment, rather than accepting the personal return in isolation. Ontario family law rules expect exactly this level of disclosure from a parent who controls a corporation, and framing the request that way avoided an early fight over whether it was warranted.
2. Retained a business valuator to review the corporate statements. A chartered business valuator went through three years of retained earnings, identified which portions had funded actual equipment and renovation costs, and flagged which portions had simply accumulated without a clear business purpose. That analysis turned a vague sense that Sanjay was under-reporting into a dollar figure with a documented basis.
3. Identified personal expenses run through the corporation. The valuator's review also picked out a vehicle used mostly for personal driving, a portion of phone and home internet costs, and a handful of other expenses that conferred a personal benefit on Sanjay beyond what the practice needed. Each was quantified separately so it could be added back to his income figure with a clear explanation rather than treated as a single lump-sum guess.
4. Proposed an imputed income figure with full supporting detail. Rather than filing a motion immediately, we sent Sanjay's lawyer a detailed proposal setting out an imputed income that combined a reasonable salary draw, the personal-benefit add-backs, and a share of the retained earnings the valuator judged unnecessary to the business — supported by the underlying financial statements so the reasoning, not just the conclusion, was on the table.
5. Negotiated toward a workable compromise. Sanjay's lawyer pushed back on the retained-earnings component, arguing the practice needed a larger buffer than the valuator had allowed for, given a planned equipment upgrade. Rather than take that dispute to a contested motion — where the outcome, timeline and legal cost were all uncertain — both sides negotiated a middle figure for the retained-earnings portion, while accepting the personal-benefit add-backs largely as proposed, since those were harder to dispute on the evidence.

The outcome

The parties settled on an imputed income for Sanjay that was substantially higher than his personal tax return had shown, but somewhat lower than the figure Deepa's evidence could arguably have supported at a contested hearing. Support was recalculated on that basis, and the agreement included a requirement that Sanjay provide the same three categories of disclosure — corporate statements, corporate returns and personal returns — every year going forward, so the figure could be revisited as the practice's finances changed rather than locked in based on a single snapshot.

Deepa accepted the compromise on the retained-earnings component because the alternative carried real risk on both sides. A contested motion would have required the valuator to testify, added months to the timeline, and left the final number in a judge's hands rather than the parties' own. It was also possible a judge would have accepted the practice's stated need for a larger equipment buffer, landing on a figure closer to Sanjay's position than to Deepa's. Settling meant giving up some of that upside in exchange for certainty and a faster resolution for their son.

For Sanjay, the settlement meant accepting a support obligation calculated on an income well above what his corporation had ever paid him personally, along with an ongoing disclosure obligation that removed his ability to manage the corporation's payout timing purely around tax efficiency without it affecting support. Neither side got everything the numbers could theoretically have supported. What both sides got was a figure grounded in real financial evidence, reached in months rather than after a year or more of litigation, and a mechanism to keep it current without repeating the entire fight from scratch.

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