Financial obligations do not end when a relationship dissolves. Following a divorce or separation, former spouses or common-law partners often embark on the process of dividing property and assets, as well as negotiating spousal and/or child support. In an ideal situation, both former spouses collaborate on the terms of their separation, and provide accurate disclosures of their financial situations. Unfortunately, that is not always the case.
If there is contention as to the accuracy of the payor parent’s declared finances, the question arises – who is obligated to provide the proof? The short answer, as discussed in Cunningham v Seveny: the payor parent.
Misrepresentation of Income
A payor parent’s income, for the purposes of the Federal Child Support Guidelines, is established based on the amount declared on Line 150 of their annual tax return. If the payor parent wishes to evade their child support obligations, they may strive to reduce this number. In situations where the payor parent receives income from self-employed sources, or through a partnership or corporation that they control, they may claim business expenses that contribute to reducing their Line 150 income.
Business expenses such as the use of a corporate vehicle, cell phone, or computer, as well as costs associated with entertainment, travel, and more, may be deducted for income tax purposes. However, these business expenses may also result in a personal benefit to the parent, which may therefore render them relevant in child support calculations.Â
Imputation of Income
Where a payor parent is found to be dishonest about their finances, the court may enact an imputation of income. This means that a new amount, deemed appropriate by new calculations, may be imputed – or, attributed – to the payor parent. They will then be required to pay child support based on the imputed amount, not the amount they initially claimed.
Burden of Proof
In Cunningham v Seveny, the payor parent claimed he had provided all relevant financial information for the calculation of the support he owed. He contended that his ex-wife was responsible for engaging an external assessor to examine the reasonableness of his claims, since she was the one bringing their accuracy into question. The court, however, ruled his contention to be incorrect.
The rights of children are the priority in child support cases. If the recipient parent must hire a lawyer or external assessor to investigate the payor parent’s finances, these costs may reduce the amount of financial support the children receive in the meantime, potentially impacting their quality of life.
The payor parent must therefore disclose their deductions from the outset. If they wish to claim that the deductions had no personal benefit to them, then they must provide the court with reasonable explanations. In the case of Cunningham v Seveny, the court ordered the payor parent to provide adequate disclosure of his income, with explanations where required. Any recalculations of child support would then be based on this amount.
Contact Verhaeghe Family Lawyers Today
If you have questions regarding a matter of child support, spousal support, divorce, or more, our Alberta family lawyers may be able to help. Contact us today through our online booking form or over the phone to schedule a consultation with Verhaeghe Law and discuss what may be possible in your case.
* Note that the information in this article is intended as a general overview on a legal subject. It does not constitute legal advice. If you are seeking legal advice, please speak with a lawyer.
