Separated spouses who pay child support are often surprised by the short shrift family lawyers give them when they ask why there is such strict adherence to the “table” child support calculated under the Child Support Guidelines (the “CSG”).
In Canada, there are two parts to child support: “table” child support, for a child’s basic expenses; and “special or extraordinary” expenses, which are often called “Section 7s” after the section in the CSG that references them.
Table child support is based on a formula under which the amount of the payment changes depending on the payor’s income and the number of children for whom support is paid. A payor making $150,000/year, paying child support for one child would pay table support of $1,263/month; a payor making $250,000/year would pay $2,003/month for the same child.
“Table” child support is based solely on the payor’s income, no matter the income level of the parent with whom the child lives.
Section 7s are expenses which are paid in addition to table child support and are paid proportionately by each spouse depending on their share of the spouses’ total combined incomes. S-7s can include child-care expenses necessary for the recipient spouse’s employment, health-related expenses not covered by a plan and post-secondary education — none of which are covered by the basic table amount.
While exceptions to paying table support exist in the CSG, a recent case from the Nova Scotia Court of Appeal demonstrates the high threshold payors must meet before they are able to pay less than the table amount their income dictates.
One exception to the CSG is “undue hardship.” If a payor can show that the payment of table child support results in “undue hardship,” the Court can order that the payor pay less than the table amount.
This issue was under appeal in Nova Scotia in Reid v Faubert, where the mother and child lived in Nova Scotia and the father lived in Ontario. The father estimated that he spent $18-$20,000 annually exercising access to his daughter given the frequent trips back and forth between the provinces.
The father was the sole owner of two corporations. The trial judge found that the father’s income was $85,000 annually. Based on that income, the father was ordered by the trial judge to pay $762/month as table child support and 51 per cent of the Section 7s for daycare (another about $275/month).
The trial judge found that the father met the “undue hardship” provisions of the CSG because of his high access costs, and ordered that the father pay $500/month as table child support, rather than $762/month.
Justice Cindy A. Bourgeois for the Nova Scotia Court of Appeal, set the trial judge’s decision aside.
In reviewing the decision, Justice Bourgeois referred to the preamble of the CSG and their purpose: to establish a fair standard of support, to reduce conflict by providing more objectivity and to ensure consistent treatment of parents and children in similar circumstances.
Justice Bourgeois then confirmed the approach required to determine child support under the CSG.
A court must first look at a parent’s “total income” (found at Line 150 on his/her tax return).
After that, (and only after considering that income) if a parent’s annual income for the prior year is not the fairest determination of income, the court may consider other options. Those include looking at the parent’s pattern of income over the past three years or, if the parent is a shareholder and their tax return does not fairly reflect all income available, all or part of the parent’s corporation’s pre-tax income.
The Court of Appeal stressed that it is the payor’s obligation to provide clear evidence about why a corporation’s pre-tax income still held in the corporation is not available for support. In the past, this evidence has included whether there are bona fide business reasons to keep the money in the corporation: For example, is capital required by the corporation or are there financing/ banking restrictions?
The Court of Appeal took issue with the trial judge for failing to start her analysis with the father’s “total income” on his tax return, and for failing to explain how she arrived at the $85,000 income level, as this amount was not found on his tax returns and there were pre-tax earnings in his corporations.
The appellate court also considered the trial judge’s finding of the father’s “undue hardship.”
In order to trigger such a finding, the father was required to prove specific facts demonstrating that it applied. Once he did, the father then had to show his household would have a lower standard of living than the recipient’s household if he had to pay table support.
The appeal court also noted that even if both were proven, the court was not obliged to change the amount of table support payable.
Justice Bourgeois defined “undue hardship” and held that the father had to prove that he would experience “excessively hard living conditions” if he had to pay the table amount. In this case, the Court of Appeal found that the trial judge failed to explain how the father would have suffered “excessively hard living conditions” if he was ordered to pay table child support and ordered a new hearing.
In Reid, the Nova Scotia Court of Appeal confirms just how hard it is for a payor to extricate himself from paying table child support.
This article originally appeared in the National Post.
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