Imputing Income for Child Support in BC

When the Tax Return Is Not the Real Story

Child support follows income, and most of the time income is read off a tax return. But sometimes the return does not reflect what a parent actually earns or could earn. For those cases, the Federal Child Support Guidelines let the court impute income, which means attributing an income figure to a parent that is higher than the one they report, and calculating support on that figure instead. Imputing income for child support in BC comes up in both directions: recipients ask for it when the reported number looks too low, and payors need to answer it when their real earnings are questioned.

SiLaw Group Family Lawyers is a boutique family law and mediation firm in South Surrey. Family law is the only kind of law we practise, and we serve clients in English and Punjabi. This page explains the grounds for imputing income, how self-employment and corporate income are handled, and why disclosure sits underneath all of it. For background, see our complete child support guide and our child support services.

The Section 19 Grounds for Imputing Income

Section 19(1) of the Guidelines says the court may impute such amount of income as it considers appropriate in the circumstances, and it lists circumstances that include the following:

• the parent is intentionally under-employed or unemployed, unless that is required by the needs of a child or by the parent's own reasonable educational or health needs
• the parent is exempt from paying federal or provincial income tax
• the parent lives in a country with significantly lower effective income tax rates than Canada
• it appears that income has been diverted in a way that would affect the support calculation
• the parent's property is not reasonably used to generate income
• the parent failed to provide income information when legally required to do so
• the parent unreasonably deducts expenses from income
• the parent gets a significant portion of income from dividends, capital gains, or other sources taxed at lower rates than employment income, or exempt from tax
• the parent is a beneficiary under a trust and receives or will receive income or benefits from it

The list is open-ended: these are included circumstances, not the only ones. On the deductions ground, section 19(2) adds a point that surprises many self-employed people. Whether an expense is reasonable for child support is not settled by whether the CRA allows the deduction. A write-off can be perfectly legal for tax and still be added back for support.

Self-employment and Corporate Income

For self-employed parents and business owners, two more tools sit beside section 19.

First, Schedule III of the Guidelines adjusts self-employment income directly. Where net business income was reduced by salaries, wages, management fees, or other payments to people the parent does not deal with at arm's length, such as family members, those amounts are added back unless the parent establishes the payments were necessary to earn the income and reasonable in the circumstances.

Second, section 18 deals with parents who are a shareholder, director, or officer of a corporation. If the parent's personal income does not fairly reflect all the money available for child support, the court may include all or part of the corporation's pre-tax income for its most recent taxation year, including income of related corporations, or an amount in line with the services the parent provides to the company. In determining that pre-tax income, payments the corporation made to non-arm's-length people are added back unless shown to be reasonable. In short, leaving earnings parked inside a company does not automatically keep them out of the support calculation.

Disclosure Is the Foundation - and Non-disclosure Has Teeth

Every imputation argument runs on documents. Sections 21 through 25 of the Guidelines set out the income information parents must exchange: tax returns and notices of assessment for the three most recent taxation years, recent pay information, and, for the self-employed and business owners, financial statements and breakdowns of non-arm's-length payments, with trust and partnership records covered too. Our Form F8 financial statement guide shows how this looks in a BC court file, and our post on the importance of disclosure explains why holding documents back backfires.

The Guidelines back the duty with consequences. If a parent fails to provide required income information, the other parent can move the case forward anyway, and the court may draw an adverse inference and impute income in the amount it considers appropriate (section 23). Where a court order to disclose is ignored, the court can strike pleadings, make a contempt order, impute income, and award full costs (section 24). Failing to disclose is itself a listed ground for imputation. Hiding the ball does not lower support; it usually raises it.

Income questions also reach backward. If support was set on an income figure that turns out to have been wrong or incomplete, past support can be revisited. See our page on retroactive child support.

Frequently Asked Questions

When Can a Court Impute Income for Child Support?

Whenever it considers it appropriate in the circumstances. Section 19(1) lists examples, including intentional under-employment or unemployment, tax-exempt income, residence in a low-tax country, diverted income, idle property, unreasonable expense deductions, income taxed at low rates, trust benefits, and failure to disclose. The court then fixes the income figure it considers appropriate and calculates support on it.

Can Income Be Imputed to a Parent Who Quit a Job or Took a Lower-paying One?

It can be, if the court finds the parent is intentionally under-employed or unemployed. The Guidelines carve out situations where the choice is required by the needs of a child or by the parent's own reasonable educational or health needs. Outside those, a parent who earns less than they are able to earn may be treated as if they still earned the higher amount.

How Does a Company Owner's Income Get Assessed?

The court is not limited to the salary or dividends the owner chooses to pay themselves. Under section 18, it can look at the corporation's pre-tax income, add back non-arm's-length payments that are not shown to be reasonable, and include what fairly reflects the money available for support.

What Happens If the Other Parent Simply Refuses to Disclose?

The case does not stall. The court can order disclosure, award costs, draw an adverse inference, and impute income at the level it considers appropriate.

Talk to a Child Support Lawyer in Surrey for Free

Whether you believe the other parent's income is understated, or your own numbers are being challenged, get advice early. The first 30 minutes with us are free, in English or Punjabi, by phone, video, or in person at Suite 201, 3108 Croydon Drive in South Surrey. Call (778) 381-9977 or Book Now for a Free Consultation.

This page is legal information, not legal advice. For advice about your own situation, speak with a lawyer.