When can a support payor’s lifestyle lead the court to impute additional income?


Child support and spousal support are determined based on a payor’s income, specifically, the payor’s “annual income determined under sections 16 to 20” of the Child Support Guidelines.

This article will briefly outline these sections of the Child Support Guidelines and then will discuss what a court may do when the lifestyle of a support payor does not reflect their reported income. In some instances, a court may decide to impute additional income to the payor, resulting in a higher income and, therefore, higher support payments.

Determining annual income under the Child Support Guidelines

Suppose a payor is an employee with an hourly or salaried job. In that case, determining income can be simple, and the payor’s income tax returns can be used, specifically “total income” set out in the payor’s T1. This is provided for in section 16 of the Child Support Guidelines.

Under section 17 of the Child Support Guidelines, if the “total income” provided in the payor’s T1 would not be the “fairest determination of income,” the court may look at the payor’s income over the last three years and determine a reasonable and fair income.

Section 18 of the Child Support Guidelines applies to payors who are shareholders, officers, or directors of a corporation, and, again, the payor’s T1 does not “fairly reflect all the money available to the spouse for the payment of child support.” In such a case, the payor’s income may be determined to include all or part of the pre-tax corporation income or an amount commensurate to the services that the payor applies to the corporation.

Section 19 of the Child Support Guidelines deals with imputing income to a payor, and that is discussed in detail below.

Section 20 of the Child Support Guidelines relates only to payors who are non-residents in Canada. In such cases, the payor’s annual income is determined as though they were resident in Canada.

The court has the discretion to impute additional income to a support payor

Under section 19(1) of the Child Support Guidelines, the court has the discretion to impute income to a payor in certain circumstances, some of which are set out in the Guidelines:

  1. the parent or spouse is intentionally under-employed or unemployed, other than where the under-employment or unemployment is required by the needs of any child or by the reasonable educational or health needs of the parent or spouse;
  2. the parent or spouse is exempt from paying federal or provincial income tax;
  3. the parent or spouse lives in a country that has effective rates of income tax that are significantly lower than those in Canada;
  4. it appears that income has been diverted which would affect the level of child support to be determined under these Guidelines;
  5. the parent’s or spouse’s property is not reasonably utilized to generate income;
  6. the parent or spouse has failed to provide income information when under a legal obligation to do so;
  7. the parent or spouse unreasonably deducts expenses from income;
  8. the parent or spouse derives a significant portion of income from dividends, capital gains or other sources that are taxed at a lower rate than employment or business income or that are exempt from tax; and
  9. the parent or spouse is a beneficiary under a trust and is or will be in receipt of income or other benefits from the trust.

This list above is not exhaustive. The court has the discretion to impute income “when appropriate in the circumstances.” When imputing income in circumstances that are listed above, or circumstances that are not analogous to those listed above, a court will consider the objectives of the Child Support Guidelines, and in particular, “to establish fair support based on the means of the parents in an objective manner that reduces conflict, ensures consistency and encourages resolution” (Bak v Dobell, 2007 ONCA 403 at para 36).

The court’s only limitation in terms of what amount it can impute is that there must be a reasonable basis in the evidence for the imputed amount.

When a payor’s income does not match their lifestyle

At times, the support recipient and the support payor cannot agree on the payor’s income to calculate support. A support recipient may think that the support payor’s lifestyle does not reflect the payor’s reported income and may ask the court to impose additional income on that basis.

In the case of Bak v Dobell, the Ontario Court of Appeal commented that

“Lifestyle is clearly not a type of income, receipt or benefit included in total income. Canadians are not taxed on lifestyle.

“Equally clearly, however, a payor’s lifestyle often will be relevant to whether a court may impute income under s. 19(1) of the Guidelines. For example, it may be apparent from lifestyle that a payor is receiving undeclared income because he or she has historically worked, lives comfortably with the usual trappings, and yet declares minimal income for tax or child support purposes. In such a case, the recipient who calls evidence of the payor’s lifestyle will ask the court to draw the reasonable inference that the payor must have a greater income than he or she has disclosed.”

The Court of Appeal in Bak further clarified that lifestyle is not income per se, but it can be evidence from which an inference can be drawn that a payor has undisclosed income, and this undisclosed income may be imputed to determine support quantum.

The spouse seeking income to be imputed must establish some evidentiary basis for the claim. However, the support payor must also discharge their obligation to provide all relevant evidence related to their income. Where they do not, they risk having an income imputed based on their lifestyle. This is what occurred in the case of V.S.B. v B.L.O. In that case, the court held that it did not have reliable evidence on which to base a determination of the payor’s income and instead assessed the father’s lifestyle, which included the rent paid by the payor, other expenses, and his debt level. The court concluded that “the only logical conclusion from the above analysis is that the [payor] is receiving income that is not being reported.”

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