Financial Disclosure is Vital to Child Support Calculations
In Canada, child support is determined by looking at both parties’ total income for the year, so it is crucial to have an accurate accounting of what each person makes. Occasionally, self-employed individuals will attempt to obscure their total income to pay a reduced amount. In those situations, if the Court determines that the taxable income declared by the corporate-earning parent does not fairly reflect the true amount of income that parent receives or should receive, it may consider the pre-tax income of that parent’s corporation to ensure a just result for the child.
In Rolinger v Rolinger, 2021 ABQB 474, a recent case out of the Alberta Court of King’s Bench, the Honourable Justice M.J. Lema (“Justice Lema”) discussed this issue.
To combat under-reporting, Justice Lema quoted Colucci v Colucci, 2021 SCC 24, “that financial disclosure is the linchpin of a just and effective family law system” (para 4). Quoting from Ripulone v Smith, 2018 ABCA 167, at para 15, Justice Lema is clear that each party must present disclosure that is in “a transparent and understandable format […] in other words, the self-employed or Corporate parent cannot avoid paying his or her fair share of child support by failing to fully and properly disclose in a timely manner.”
Properly detailed financial disclosure allows the Court to determine a more realistic income to calculate more accurate child support. Accordingly, all “corporate-income-earning support payors must provide comprehensive information to the expert(s) gauging income” (Rolinger at para 16). Each party also must ensure that the disclosure is in a form that the Court can readily review and interpret, “bundles of receipts, papers, and bank statements” is not sufficient (Rolinger at para 15 quoting Ripulone).
The expert report is then provided to the other side for review.
Once proper financial disclosure has been exchanged each side should get sufficient time to examine the documents and to question each other on irregularities within that disclosure. For example, if there are various unexplained deposits into the payor’s bank accounts, it does not necessarily mean they are receiving unreported income. Reasonable excuses for unmarked deposits may exist such as repayment of loans, gifts, withdrawals from investment accounts, tax refunds from the CRA, or any number of other explanations.
After disclosure has been provided and questioning has been completed by each side the Court is in the best possible position to determine the correct amount of support for the child.