When determining child or spousal support, the primary consideration is the income of both parties. However, relying solely on reported income can sometimes lead to unfair or inaccurate assessments, particularly when one party is underreporting income, voluntarily unemployed, or structuring their finances in a way that does not reflect their true earning capacity. In such cases, income imputation in Ontario becomes necessary to ensure a fair evaluation.
To address such situations, courts have the authority to impute income. This means they assign a reasonable income amount to a party based on their earning potential, historical earnings, or other relevant factors. Income imputation ensures that support obligations are fair and reflective of the parties’ actual financial circumstances.
This article outlines the key legislative provisions governing income imputation, and some examples of how the most common avenue to income imputation is used.
Legislative Framework
Income imputation is primarily governed by section 19(1) of the Federal Child Support Guidelines, which is mirrored in section 19 of the Ontario Guidelines. These provisions list several factors under which a court may impute income. However, the list is not exhaustive, meaning that courts are not limited to these factors and judges have discretion to impute income in other circumstances where it is deemed appropriate.
Section 19(1) of the Child Support Guidelines:
Imputing Income
(1) The court may impute such amount of income to a spouse as it considers appropriate in the circumstances, which circumstances include the following:
- (a) The spouse is intentionally under-employed or unemployed, unless the underemployment or unemployment is required for the care of a child, or due to reasonable educational or health needs.
- (b) The spouse is exempt from paying federal or provincial income tax.
- (c) The spouse lives in a country with significantly lower income tax rates than Canada.
- (d) Income has been diverted in a way that affects child support calculations.
- (e) The spouse’s property is not reasonably utilized to generate income.
- (f) The spouse has failed to provide income information when legally required.
- (g) The spouse unreasonably deducts expenses from income.
- (h) The spouse derives a significant portion of income from lower-taxed sources such as dividends or capital gains.
- (i) The spouse is a beneficiary of a trust and receives income or other benefits from it.
It is important to note that these factors are often considered together rather than in isolation. For the purpose of this article, I will focus on s.19(a)(1), under/unemployment.
Key Principles of Income Imputation
As per Turnquist et al.[1], there are four key concepts which apply to all matters which concern imputation of income, regardless of which enumerated head they fall under. These are:
1) imputation of income is entirely an exercise of judicial discretion.
2) The party seeking to impute income bears the onus to establish the evidentiary basis to justify imputation.
3) It is not enough to establish that the circumstances warrant an imputation of income. Evidence must also establish the amount of income that should be imputed.
4) A finding of imputation of income is made on a balance of probabilities.
Intentional Underemployment or Unemployment (s.19(1)(a))
The most commonly used justification for imputed income, s.19(1)(a) establishes that the court may impute income where one party is intentionally underemployed or un-employed. Under the Guidelines, exceptions exist when a party’s unemployment or underemployment is necessary for:
- Caring for a child (e.g., a stay-at-home parent caring for young children)
- Pursuing education or training (if reasonable and beneficial for future earning capacity)
- Health reasons (if supported by medical evidence)
So, if you are not earning as much as you cold be because you are caring for your children, the court will not hold that against you. Also, if you are attending school full or part time, the court will take that into account.
Once intentional underemployment is established, the burden shifts to the responding party to prove that their employment status is justified. If they fail to do so, the requesting party then must provide evidence supporting how much imputation the court ought to order.
Key Case law
In Ontario, the leading case on imputation of income under s.19(1)(a) is Drygala v. Pauli[2]. The Ontario Court of Appeal in this case ruled that each parent has a responsibility to provide for their children in an amount proportionate to their earning capacity.
A parent has a duty to earn what they are reasonably capable of earning, or at least make reasonable efforts to seek employment. If they fail to do so, they may be found intentionally underemployed or unemployed, and income may be imputed accordingly
This principle was later fleshed out in the base of C.V. v. S.G.,[3] where the court clarified that the party seeking to impute income does not need to prove bad faith on the part of the underemployed party. The test is objective, focusing on earning capacity, rather than the subjective intent of the payor. The court will assess whether the payor is earning what they reasonably could given the whole of the context, including their skills, past earnings, and opportunities.
In determining what amount of income ought to be imputed, courts consider what is reasonable in the circumstances, including the parent’s age, education, health, the number of hours that could be worked in light of the parent’s overall obligations and the hourly rate that the parent could reasonably be expected to obtain.
Defences to Imputation Based on S.19(1)(a)
While courts have broad discretion to impute income, certain circumstances may justify underemployment entirely or at least justify a lower amount of imputation.
Seeking education or training
While further education or training can sometimes justify a lower income, it must be reasonable in the circumstances. For example, in Lalonde,[4] a parent was laid off from his full time employment, and decided to pursue training as a scuba diving instructor, without attempting to find alternative work.
The court determined that a healthy parent should not be excused from their support obligations on pursuant of “unrealistic or unproductive career aspirations”, and income was imputed at the level they had previously earned.
However, in cases where the education would be likely to enhance the payor’s future earning capacity, courts may impute income at a reduced level while they upgrade their skills.[5]
Health reasons
A court will generally not impute income if a parent can provide clear medical evidence demonstrating an inability to work. As per Mansour v. Hassan, the party alleging a health issue must provide sufficient evidence as to:
- the nature and magnitude of the health problem; and
- the connection between the health issue and the person’s capacity to earn a higher income.
A simple claim of health issues is insufficient. Courts require detailed medical opinions outlining the condition and linking it to the parent’s inability to work.[6]
Caring for another child under the age of the majority
A parent caring for an additional child (who is not the subject of the support order) may, in some cases, argue against income imputation. However, courts rarely extend relief beyond the standard parental leave period (approximately one year). A parent choosing to stay home beyond that period will often have income imputed based on their earning capacity.
Conclusion
Income imputation can significantly impact child and spousal support obligations. Courts assess each case based on objective factors, and defending against imputation requires strong evidence and legal expertise. If you are facing a support dispute involving imputed income, consulting with a family law lawyer can help protect your rights and ensure a fair outcome. Legal professionals can assess your case, present the necessary evidence, and advocate for a reasonable support determination based on your true financial circumstances.
[1] “The When, What, Why, and How of Imputing Income”, prepared for the 49th National Family Law Program by Lauren Turnquist and Adam Marofke, with contributions from Sharon Gray.
[2] Drygala v. Pauli, 2002 CanLII 41868, 2002 O.J. No. 3731 (ON CA)
[3] C.V. v. S.G., 2019 ONCJ 159 at para 329.
[4] Lalonde v. Lalonde, [2005] W.D.F.L. 2968
[5] Tillmanns v. Tillmanns, 2014 ONSC 6773.
[6] Mansour v. Hassan, 2023 ONSC 2054.
Written By Caidan Ubell