Understanding the Child Support Guidelines
The Federal Child Support Guidelines
Previously a Court had considerable discretion in making a child support order. A Court granted child support in accordance with the conditions, means, needs and other circumstances of each spouse and any children for whom support was sought. Now, child support orders are determined in accordance with the Child Support Guidelines. Similarly, any variation of a previous child support order is to be made in accordance with the guidelines.
Unless otherwise stated, the amount of child support for a child under the age of majority is an amount that is set out in an applicable table plus any additional amounts for special or extraordinary expenses.
For example, if Jane applies for child support from John for their five year old daughter, the amount of child support that John will pay to Jane is set out in a table. Assuming John earns $29,000.00 per year for the purposes of the guidelines and there are no other children of their marriage, John will at a minimum pay Jane $258.00 per month. While the presumptive rules can make determining child support straight forward, it’s not quite that simple.
What about special or extraordinary expenses? They are in addition to the amount in the applicable table. Included in these “add-ons” are expenses such as child care, medical and dental insurance premiums, health related costs, education expenses and extracurricular activities. Consider when and what proportion of these expenses should be paid in addition to the table amount.
What about a payor’s income? Generally, income is the amount that the payor indicated under the heading “Total Income” in Revenue Canada’s T1 General form for the last taxation year. At a minimum therefore a payor’s most recent tax return must be reviewed. However, that is not always the end of the inquiry. A payor’s income is subject to adjustments. A court can increase the income of a payor if the payor income splits with another individual.
Additionally, a court can impute income to a payor if the payor is intentionally under-employed or not employed. The court can also average the income of a payor over a period of time, rather than accept the past annual income. There are a number of other provisions in the guidelines that can alter a payor’s income and result in significantly higher or lower awards.
What if a payor can’t afford to pay the guideline amount? It is possible to pay an amount less than the base amount in the guidelines. However, this will rarely be the case. Before a court will order an amount less than the guidelines, the payor must demonstrate “undue hardship.”
Undue hardship can be shown by demonstrating that the payor (i) has an unusually high level of debts which were reasonably incurred to support the spouses and their child(ren) before separation or which were incurred to earn a living, (ii) has unusually high expenses in relation to exercising access to a child, or (iii) has a legal duty to support another child or spouse. However, the inquiry does not end there.
Once a court is satisfied that one of the above circumstances exists, the payor must also demonstrate that his or her household’s standard of living is less than the standard of living than that of the recipient’s, before a court may award an amount less than the guidelines. How is that determined? A complex mathematical formula that necessitates full disclosure of all income sources for both households (including significant others) will determine if the second step in the case of hardship is met.
One must be careful in other areas involving the guidelines. What about shared custody situations? What about split custody situations?
Recipients and payors must also be aware of the lack of tax consequences of payments made following from a court order or agreement dated on or after May 1, 1997. Before payments made were tax deductible to the payor. Now, payors cannot deduct any payments from income. Recipients now similarly don’t have to include any payments in their income for tax purposes. Care is again needed here. Among other things, the tax consequences of spousal support orders are completely different, so don’t agree to a lump, monthly sum for both child and spousal support in an order or agreement.