Step 5: Calculate annual income

Annual income is the amount of money a person earns from all sources, including employment, self-employment and investments.

The annual income of the paying parent is a key factor in determining child support amounts. The guidelines are built on the principle that both parents should share the same portion of their income with their child as they would if they had continued to live together. Therefore, they reflect the fact that parents normally spend more on their children as their income increases. In general, the more a person earns, the more that person must pay in child support.

This section covers these topics:

• How to calculate annual income
• Other factors in determining annual income
• Below minimum income
• Who must provide income information
• Proof of income
• Parents must supply income documents
• Annual updates of income information

How to calculate annual income
In most cases, annual income is easy to determine from the "Total Income" line on the paying parent's income tax return, especially if he or she is a salaried employee.

"Annual income" refers to gross income, before taxes, from all sources, subject to some minor adjustments. Parents may apply the guidelines using that amount and, if appropriate, taking into account any recent increases or decreases to that amount. Go to the tables.

It may be difficult to determine annual income if parents

• are self-employed;
• have investment income or property; or
• are directors or major shareholders in a corporation. In these situations, parents may wish to consult a lawyer. Note that "income" is calculated differently for purposes of the guidelines than it is for income tax purposes.

Other factors in determining annual income
If a parent believes that his or her income for tax purposes (or that of the other parent) does not provide a fair description of that person's income, he or she can ask the court to look at other factors to assess the correct level of income. For example, if a parent. s income has recently changed significantly, his or her income tax information may not be up-to-date, accurate or a fair reflection of income.

For more information, see Other factors in determining annual income for purposes of the guidelines.

Below minimum income
The guidelines set a minimum income level below which payments are not required. This amount represents the basic amount of income a person requires to meet his or her basic needs. In some cases, the court may attribute income to a parent where the court thinks that the income claimed does not accurately represent the actual or potential income of the individual.

Who must provide income information
Usually, only the income of the paying parent is necessary to determine the child support amount. However, the receiving parent will also have to provide income information in certain circumstances, such as if:

• there are special expenses (see Step 7);
• either parent claims undue hardship (see Step 8);
• there is split or shared custody (see Step 3);
• the child is at or over the age of the majority (see Step 2); or
• the payer earns more than $150,000.

If income changes, either parent may decide that it is appropriate to change the amount of child support. This can be done by agreement or by court order.

Proof of income
If your income is a factor in the determination of child support, you have a legal obligation to present proof of your income. In all cases, the paying parent must provide this proof. In certain circumstances, the receiving parent must also provide proof of income.

The proof must include income tax returns and notices of assessment and reassessment from Canada Customs and Revenue Agency for the last three taxation years.

Sometimes, parents may have to provide other information. For example, employees must provide the most recent statement of earnings or a letter from their employer verifying their salary or wages. Self-employed people or people in control of a corporation must provide financial statements. Parents may also have to provide details of any business partnerships and copies of trust settlement agreements, along with the trust's three most recent financial statements.

If both parents agree in writing on the annual income of a parent and the amount seems reasonable, given the proof of income information, the court will assume it to be correct.

Parents must supply income documents
If a parent does not supply the documents needed to prove income, the court may order that he or she do so or face serious penalties. The penalties could include being found in contempt of court or having to pay the other parent. s legal costs.

Annual updates of income information
A parent may ask for proof of income from the other parent (if the other parent. s income was used to determine the child support amount) for any taxation year after a court order is in place. The parent must make the request in writing and cannot ask for the information more than once a year. The law requires the other parent to provide the documents when requested.

A parent may ask, in writing, for current information about the status of any special expense. A parent may also ask for current information on the circumstances that caused undue hardship for the other parent or a child, if the other parent's income was a factor in determining the child support amount.

Return to Step 4 Choose the appropriate federal Table
Go to Step 6       Determine the table amount