The calculation of child support obligations is not a straightforward procedure when one of the parents has a controlling interest in a business. When both spouses are employed by others, a review of the T4 issued by their employers is often used to determine employment income.
How Child Support is Calculated in Regard to Corporate Income
This is not the process however when one of the parents has a controlling interest, or is or sole owner of a company. When a parent can control what his/her income is and the form in which this income is taken, a number of issues must be examined to determine the true income of the parent. The Child Support Guidelines, both Federal and Provincial, address what needs to be examined to determine income in this situation. There is not an assumption that a parent who owns or controls a business is not disclosing their income, there is simply a requirement to examine additional information to determine what is the actual income available to the parent.
For example, if a parent takes a salary from the company they control and the company provides benefits such as a cell phone and vehicles, these are all examined for inclusion to determine the total income for purposes of child support. Depending on the business, the parent can have different incomes from year to year, and it may be necessary to look at a number of years income to determine the parent’s average income.
When a parent owns or controls a company, the requirement for disclosure is much greater as their personal income tax return and notice of assessment do not provide a complete picture of all their sources of income. Copies of corporate tax returns, notices of assessment and financial statements are often required to determine the true income of the parent. These calculations and the treatment of various benefits a parent may have by owning or controlling a company, can only be done through a review of the company’s tax returns and financial statements.
At Lenehan Musgrave, a family law practice based in Dartmouth, NS, we are pleased to assist parents in the understanding of the sources of income when a parent owns or controls a corporation and the calculation of child support in those circumstances.
If you need help with your divorce and child support negotiations, contact us to book a consultation with a family lawyer.
