Paying Child Support
If you are the non-custodial parent or if your child does not reside primarily with you, then you are required to pay child support.
The law views child support to be a right of your children. It is not a right of the parents. The money is intended to be there to contribute to your children’s care and maintenance. The support is payable to the custodial parent or parent with te primary residence of the child.
Once parents are living in different residences, an obligation to pay child support automatically arises, regardless of whether there is an agreement or Court order to pay child support.
Retroactive Child Support
As a practical matter your child support obligation will only commence when you and your spouse physically separate, so long as you continue to pay your share of the household expenses while you’re living under the same roof as your spouse.
In awarding child support, a Court normally will not go back more than a year before child support was originally requested, unless there is a good reason to do so (for instance, there was difficulty in locating the child support payer).
Child Support Amount
The amount of child support you are required to pay is determined based on tables that are a part of the Child Support Guidelines.
The two primary factors in determining the amount of child support you must pay is your annual income and the number of children you are paying child support for.
A potentially contentious issue in many child support cases is exactly how much income the person paying support is earning. This is a primary concern when the person paying is self-employed.
One confusing aspect of income when it comes to child support, is whether net or gross income should be used-the answer is the gross income. For most people, this will be the figure you entered on line 150 of your T1 General Tax Return.
If you are self-employed, there will be an attempt to determine what your “true” income is rather than using your income for tax purposes. This is because often self employed people structure their compensation in ways that are advantageous for tax purposes, but do not properly reflect the income they have available to help their children.
So, for instance, if you are self-employed and you are leaving money in your corporation each year to reduce taxes, the money you leave in your corporation may be included in your income for purposes of determining the amount of child support you should pay. Similarly, if you are deducting home office expenses, these amounts may be added back to your income for the purpose of calculating child support.
The judge will also consider amounts the corporation pays to people at non-arm’s length (such as family and friends) and how these amounts affect the corporation’s pre-tax income.
There is a section of the Child Support Guidelines that provides the judge with powers to “impute” income to a spouse in several different cases. These include when that spouse is exempt from federal and provincial income tax, as well as non-residents who live in countries with lower income tax rates than Canada’s.
A judge can also impute income when a spouse is (or is thought to be) hiding income, is intentionally unemployed or under-employed, or receives a majority of income that is taxable at lower rates, such as dividends or capital gains.
Judges are also given broad power to decide whether expenses deducted from income are “reasonable.” This power allows then to disregard expenses, even if they are considered legal under Canada’s Income Tax Act.
Judges can also examine the payer’s income over the past three years to determine a “pattern of income.” From this pattern, the judge can set the payer’s income at a level deemed reasonable to account for any fluctuations that seem out of place.
If your income fluctuates, you can request that the Court examine your income carefully to determine a reasonable average income, which can then be used along with the Child Support Guidelines tables to provide an appropriate child support figure.
The Court will examine your income tax returns (and any other documentation and financial records it deems appropriate) to determine a pattern of income. Additionally, this will help account for any major fluctuations that may occur from year to year.
Overtime and Bonuses
Generally, overtime is included on your T4 and entered on line 101 of your T1 General federal income tax return. As such, it is included in your calculation of income.
You can request that the Court examine your pattern of income over the past three years to ensure that the income used for calculating your support payments is not too far off of your usual or average income over a three or five year period.
The amount of child support in the child support tables is just a base amount. In addition to the table amount, the Court may add amounts for special or extraordinary expenses.
Special or Extraordinary Expenses
Many different expenses can be considered special and extraordinary, and it really depends on the unique needs of your child or children. In general, these expenses include:
- Child care or daycare expenses required by the custodial parent’s employment, disability, or education program;
- Health related expenses, such as cosmetic surgeries, orthodontic work, psychological counselling, physiotherapy, speech therapy, drug costs, glasses or other vision aids, and hearing aids if necessary;
- Extended health and dental care premiums;
- Educational aides, tutors, and other special assistance for primary and secondary school students as needed;
- Post-secondary education costs (college, trade school, or university); and
- Any expenses for school, religious-based, or other recreational activities.
The after-tax cost of these special expenses is shared between the two parents in proportion to their incomes. The after-tax aspect is important as many special expenses, such as child care expenses, are also tax deductible.
Undue hardship exists when there are factors that make it difficult for you to pay the table amount of child support. The factors must somehow arise out of the relationship itself, such as debts incurred to support your family before you separated, unusually high access costs to visit your children, or a legal obligation to pay child or spousal support to someone else.
In addition to this, you must also show that paying the table amount of child support would mean you have a lower standard of living than your ex-partner.
In addition, the Divorce Act does recognize some special circumstances that may also result in less child support being ordered by a judge. Circumstances such as transfer of property or investments may reduce your child support as the transfer may be considered financially in lieu of child support payments. For instance, you may gratuitously transfer your share of the matrimonial home to your spouse so that your spouse can remain there with your children. In this case, you would most likely be entitled to a reduction in child support.
Another reason to pay a lesser amount of child support is if you and the other parent have shared custody. Shared custody means that both of you have custody, plus you each spend approximately equal amounts of time with the children. Note that shared custody does not automatically entitle you to reduce your child support payments. You must show that your increased costs of parenting the children for more time, and the other parent’s decreased costs of parenting the children for less time merits a decrease in child support.
In making an order for child support that is less than the table amount, it is required by law that the judge include a written statement detailing the reason why a lesser amount is being paid.
If you are the parent paying child support and your child or children stay with you for an entire summer, you are still required to pay child support during the summer. The reason for this is that the custodial parent still has a lot of the normal expenses for raising the children even though the children are not there for instance, maintaining a larger home and car.
However, there may be mitigating circumstances that help you out with these payments. The so-called “40 percent” rule is one way that you can reduce your payments. If your children are with you for 40 percent of each year, approximately 146 days, then you might qualify to be considered for “shared custody.”
Life Insurance Requirements
Life insurance, with the other parent as beneficiary in trust for your child or children, is normally required in a child support agreement or Court order.
This is to protect your children in the unlikely event that you should pass away prior to your child support obligation ending. It is normal for both parents to obtain life insurance, even the parent who is not paying child support.
If the specified insurance was not purchased, and you should pass away, then your estate would still have a child support obligation.
Extended Health and Dental Benefits
Your child support agreement or Court order will normally require you to provide extended health or dental benefits for your children if these are available to you at a reasonable cost through your employment. Just remember that the premiums required for these benefits are not considered a part of your child support payments.
Taxation of Child Support
The tax status of your child support payments depends entirely on when you negotiated your child support agreement or when the Courts issued a child support Court order. After May 1, 1997, your child support payments are not tax deductable. On May 1, 1997, new Child Support Guidelines were brought into effect that cancelled a previous tax deduction.
In the case of agreements or Court orders made before May 1, 1997, the payer is able to deduct the child support payments from his or her total income. The payee is then required to claim the child support payments as income, and pay the applicable federal and provincial income tax.
If your agreement or Court order was made before May 1, 1997, you are covered by a grandfather income clause, which allows you to continue to deduct child support paid from his or her income. If you or the other parent would prefer or agree to use the new tax system, then you have the option of petitioning the Court to have the tax status of your current agreement or Court order changed to match the tax status set out in Canada’s Child Support Guidelines (or updated to reflect the Guidelines amount).
Use of Child Support
Parents have concerns that the money he or she is paying toward child support is not being used properly. Unfortunately, once the order for child support payments is in place, you have absolutely no control over how the child support is used.
The Court presumes that since the custodial parent is responsible enough to care for the child or children, he or she is also responsible enough to apply the child support payments appropriately in caring for the child or children.
The only part of child support payments that must be specifically directed are the special or extraordinary expenses.
Another concern for parents is that he or she will be denied access to their child but still be required to pay child support. There are absolutely no circumstances under which you can unilaterally stop paying child support, even if you are being denied access to your children.
Only a judge has the power to decide whether you should stop paying child support.
You cannot deny visitation just because you have not received child support payments, even if you have not received child support payments for several months. You are still required to comply with the terms of your access order.
You can get help from the government and the Courts to collect your child support. The Court has the power to very the terms of an access order when child support payments are not being made and there are significant arrears.
You are responsible for child support for any child you have had, whether you married the other parent or not.
If the child’s paternity is disputed, you may be required or request to take a biological test to determine if you are the father.
Paying in Cash
It is inadvisable to pay your child support in cash. There would be no record of the transaction. You will then be vulnerable to a claim for the other parent that you never actually made the child support payment at all, unless a written receipt was obtained.
Generally, you can arrange for your bank to transfer funds directly to your spouse’s account, or you can provide a series of post-dated cheques each year. Either of these methods will ensure that you have an adequate record of the child support you have paid.
If you are paying spousal support in addition to child support, you can deduct the amount of spousal support paid from your total income before your share of any special and extraordinary expenses is calculated. Similarly, the other parent would add on the spousal support they are receiving in calculating their share of any special or extraordinary expenses.
However, you may not deduct spousal support payments from the income used to determine your basic child support payments.
Child Support for Adult Children
If you are paying child support for an adult child who has left home to attend school, the amount of child support payable is left to the judge’s discretion. However, there are generally two different ways that child support payments are calculated in this situation.
The first is that you may be required simply to pay the amount shown in the table for your child, plus your share of a limited amount of the child’s expenses-normally, tuition, textbooks and residence.
The other method of calculation is to prepare a budget for all of the child’s living expense when away from home. This would include not only tuition, textbooks and residence, but all food, travel expenses, and more. You and the other parent would share the payment of this budget in proportion to your incomes. In addition to this, you would be required to pay a fixed monthly amount, often half of the table amount of child support, to cover the other parent’s fixed expenses, such as the child living there during holidays and the summer, as well as maintaining a house year round that’s large enough to accommodate the child.
If you are involved in a new relationship, you do not have to fear paying more child support based on your new spouse’s income, unless your current child support order includes an “undue hardship order to be re-examined if you get involved in a new relationship”.
If this re-examination occurs, the Court will compare the standard of living of both households, including the income of both spouses. The Court will be looking to determine whether you household still has a significantly lower standard of living than your ex-spouse’s.