While a family is intact each parent is obliged to financially support their children. When parents separate this financial obligation continues and child support is the legal right of the child but paid to the custodial parent.
A child is entitled to child support if the child is under the age of 18 or over 18 if the adult child has not withdrawn from the charge (responsibility) of the parents due to illness, disability or “other cause” usually considered to include full-time participation in a post-secondary college or university.
When parents separate, they should try to agree on the amount of child support to be paid. The Alberta Child Support Guidelines apply when the parents are unmarried or if the parents are married and neither wishes to commence a Divorce Action in the Court of King’s Bench, or cannot commence an action until they have met the residency requirements of the Divorce Act. In these circumstances, the child support claim is made under the Alberta Family Law Act and the Alberta Child Support Guidelines apply.
Priority is given to child support
It is important to know that where the Court is considering applications for child and spousal support priority will be given to child support.
Basic Child Support
The amount of basic or Section 3 child support is determined on the level of the payor’s gross income and the corresponding child support amount payable as found in the Guidelines.
The payment of child support is not tax-deductible to the payor nor taxable in the recipient’s hands.
In addition to the payment of basic child support the parents may share additional section 7 expenses on a proportionate basis, that is, the percentage of a spouse’s gross income as a function of the parent’s total gross income. The designated section 7 expenses to be shared proportionally are as follows:
Income for Guideline Purposes
The determination of a parent’s gross income for child support guideline purposes is easily determined when the payor is a wage or salary earner by referring to their annual T4 slip or line 150 on their Income Tax Return. If a payor does not file their income tax returns, the Court will look at all available reliable evidence to assess a payor’s gross income for child support purposes.
Where many difficulties and litigation ensue is where a payor is self-employed or paid by a corporation in which they have a shareholder interest. If a payor is operating as a sole proprietorship, then the statement of their business activities should show up in their personal income tax return. The Judge made case law requires that the payor provide a detailed breakdown of any personal benefits received by the payor and paid for by the proprietorship or corporation. These personal benefit amounts may be added back to the payor’s other T4 income, T5 dividend income, capital gain, or other income to determine a parent’s guideline income for child support purposes. A cottage industry of expert accountants has grown out of the need to calculate a payor’s gross income for child support guideline purposes in these circumstances.
The Alberta Rules of Court and the Alberta Court Justice (formerly Provincial Court) rules provide for the disclosure of financial information from a parent when a Court action has been commenced to request child or spousal support. Documents can be compelled using a Notice to Disclose Application (Court of King’s Bench) or a Request for Financial Information Alberta Court of Justice (Provincial Court) under the Alberta Family Law Act. A Notice to Produce an Affidavit of Records and Questioning for Discovery (oral and written) are also available in a Court of King’s Bench action to compel financial evidence from the opposing party.
Court Imputation of Income
One area of considerable litigation involves the imputation of income under Section 19(1) of the Federal Child Support Guidelines and the Alberta Child Support Guidelines. The court may impute such amount of income to a spouse as it considers appropriate in the circumstances which include the following:
(a) the spouse is intentionally under-employed or unemployed, other than where the under-employment or unemployment is required by the needs of a child of the marriage or any child under the age of majority or by the reasonable educational or health needs of the spouse;
(b) the spouse is exempt from paying federal or provincial income tax;
(c) the spouse lives in a country that has effective rates of income tax that are significantly lower than those in Canada;
(d) it appears that income has been diverted which would affect the level of child support to be determined under these Guidelines;
(e) the spouse’s property is not reasonably utilized to generate income;
(f) the spouse has failed to provide income information when under a legal obligation to do so;
(g) the spouse unreasonably deducts expenses from income;
(h) the 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
(i) The spouse is a beneficiary under a trust and is or will be in receipt of income or other benefits from the trust.
Section 19(1)(a) permits a Court to impute income to a spouse where the person is intentionally underemployed or unemployed. For years, the leading Alberta case authority on this section was the 2001 Alberta Court of Appeal case of Hunt v. Smolis-Hunt, 2001 ABCA 229 (CanLII). However, this case was recently reconsidered and reversed by a five Justice Court of Appeal panel in Peters v. Atchooay, 2022 ABCA 347 which reversed the law.
Under the Hunt v. Smolis-Hunt authority, the Court of Appeal stated that income could be imputed to a parent only if there was evidence of an intention to evade or undermine Child Support obligations through underemployment or unemployment (ie. a bad faith intention). The recent Peters v. Atchooay authority requires no such intention of bad faith; rather income can be imputed if the payor, through intentional decisions or conduct, failed to maximize their earning capacity and such decision was unreasonable.
MEA – MEP
The collection of child and spousal support is governed by the Maintenance Enforcement Act through Alberta Justice administering the Maintenance Enforcement Program. So long as the Court Order contains the MEP paragraph and is registered with the Program, the MEP will collect child or spousal support without cost to the payee. It is important to provide specific details in a child support order as to the amount of Section 3 and Section 7 expenses payable by the Respondent. If the Section 7 expenses are not specifically detailed then MEP will not enforce the collection of the expenses. See here for further explanation.