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Family Law

Calculating Income for Child Support Where Income Fluctuates from Year to Year

By Judith Janzen

When calculating income for child support, the Federal Child Support Guidelines state that where the parties do not agree on the payor spouse’s income, the court should look to the payor spouse’s line 150 income in the most recent Notice of Assessment from the Canada Revenue Agency. But what approach should the court use for calculating income for child support where the payor’s income varies significantly from year to year? That was the situation in Surana v. Surana, 2016 ONSC 3790. The payor spouse was self-employed and his income fluctuated in the years leading up to the interim application for child support. The court examined the methodology set out in the Guidelines and in reliance on s. 17, determined that the fairest way of calculating income for child support was to average the payor spouse’s line 150 income in the three most recent years.

Averaging approach to calculating income for child support

I previously discussed the issue of calculating income for child support where income fluctuates and noted that the averaging approach to income determination is very much a fact-specific exercise. Whether its adoption is fair depends on the reasons for the fluctuating income. Because the averaging approach to income determination is very fact specific, it is useful to examine Surana v. Surana to understand why the averaging approach was found to be fair in that case.

Calculating income for child support: The facts in Surana v. Surana

The spouses, who separated in December 2013, had a 14-year-old daughter and nine-year-old twin sons.  The mother’s motion seeking interim child support from January 2014 onward was heard in June 2016. Income valuation was hotly debated because the father owned his own dental practice and exercised a high level of control over the reporting of his income to the Canada Revenue Agency. Both parties retained income valuators to calculate income in the years 2013 to 2015. For the purposes of calculating income for child support on an interim basis (i.e., pending the testing of the experts’ evidence by cross-examination at trial), the court found it fair to take a conservative approach by basing the payor spouse’s income on the opinion of his own expert. The following figures were accepted by the court:

  • 2013:           $273,000
  • 2014:           $477,000
  • 2015:           $461,000

When the interim motion was heard, the court did not yet have the 2016 tax return to rely on when calculating income for child support. Because the payor spouse’s income varied significantly from 2013 to 2014, the court was required to consider which methodology was appropriate for calculating income for child support for 2016. Price J. summarized the different methodologies for calculating income for child support as follows:

[16]      Sections 1 to 19 of the Federal Child Support Guidelines (“FCSG”) set out the methodology that the court is to use in calculating a spouse’s income for the purpose of determining his obligation to pay child support.  Where the parties do not agree on the payor spouse’s income, the court is to have reference to the spouse’s line 150 income in the most recent Notice of Assessment from the Canada Revenue Agency.  Where the payor’s income has varied significantly from year to year, the court is to average his line 150 income in the three most recent years for which tax information is available.  If that does not appear to be the fairest way to determine the spouse’s income, the court is to impute income to him, having regard to all the available evidence concerning his means and circumstances.

It was noted that the lower income attributed to the payor spouse in 2013, which was significantly lower than his income in 2012 and 2014, could be explained by the fact that he changed his business’ year end in 2013. Price J. examined the methodology in ss. 15 to 19 of the Federal Child Support Guidelines and determined that it was fair to average the payor spouse’s income for the most recent three years for which the payor spouse gave valuations. The average of income from 2013 to 2015, based on those calculations, was $403,666.67 and the court used that figure to calculate the child support obligation for 2016 and on a going-forward basis.

Calculating the total child support obligation

Once the averaging approach was employed to determine the payor spouse’s 2016 income, the child support obligation was calculated as follows:

  • 2014: Table child support for 3 children, based on the payor spouse’s estimated income of $477,000 for that year, is $7,320 per month, ($2,611 + 1.44% x the amount in excess of $150,000), or $87,840 ($7,320 x 12 months) for the year.
  • 2015: Table child support for 3 children, based on the payor spouse’s estimated income of $461,000 for that year, is $7,089 per month, or $85,068 ($7,089 x 12 months) for the year.
  • 2016: Table child support for 3 children, based on average income of $403,666.67 from 2013 to 2015, is $6,263.80 per month. For the five months in 2016 up until the date the motion was heard, the child support obligation was $31,319 ($6,263.80 x 5 months).

Based on the foregoing amounts, the total child support owed for the period from January 1, 2014, to May 31, 2016 is $204,227. The payor spouse had been paying $3,500 per month for child support from June 2014 to March 2016, for a total of $77,000 ($3,500 x 22 months) plus additional amounts totalling $11,000. He was therefore entitled to a credit of $88,000 to the end of May 2016.  After crediting him with this amount, he owed net child support in the amount of $116,227. The court also ordered that he was required to pay temporary child support in the amount of $6,265 per month from the date of the interim order onward, pending the trial of the proceeding.

The bottom line on calculating income for child support where income fluctuates

The Federal Child Support Guidelines establish the framework for calculating income for child support. Where the payor spouse’s income fluctuates from year to year, s. 17 allows the court to average income over the previous three years. In Surana, averaging was found to be fair pending the trial of the proceeding and given the reason for the fluctuation in income. However, the appropriateness of the averaging approach is fact-specific and there is nothing in the language of the Guidelines that requires the use of averaging in calculating income for child support. This makes sense, as one of the goals of the Guidelines is the fair determination of the amount available to pay child support. Fairness would not be achieved by the mechanical application of averaging.