Self-Employment Income and Child or Spousal Support Payments

In order to set child and/or spousal support payments, the payor's Guideline Income must first be determined.

If a payor is an employee, often his/her Guideline Income will be the amount found on Line 150 of his/her previous year's income tax return.

However, if a payor is self-employed, the amount found on Line 150 of the previous year's income tax return may not be an accurate reflection of the actual income available to the payor for the purposes of support payments. The Federal Child Support Guidelines and the case law in this area allow the use of the pre-tax income of the corporation, less only expenses that the payor has proven to be a "fair" deduction from the pre-tax income for the purposes of child and spousal support payments. Expenses allowed to be deducted by Revenue Canada on the payor's income tax return may not necessarily be a "fair" deduction for the purposes of support payments, and a payor's guideline income may actually be much higher than the Line 150 amount from the previous year's income tax return.

Examples of expenses that are often reduced or disallowed by the court are vehicle expenses, cellular telephone expenses, home office expenses, amortization of assets, and bank charges.

In order to obtain information and advice specific to your situation, please contact one of the lawyers at Kirk Montoute LLP for advice or representation.

Article written by Laurie Stphen