Report of the Follow-Up Committee on the Quebec Model for the Determination of Child Support Payments

July 2004

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CHAPTER 5: SPECIFIC PROBLEM AREAS STUDIED BY THE FOLLOW-UP COMMITTEE

INTRODUCTION

Excluding issues which have been the focus of recommendations made during the Committee’s mandate, we propose, in the upcoming chapter, to provide a succinct summary, under various subsections, of the Committee’s deliberations concerning various aspects of the Quebec model for the determination of child support payments.

In each of the subsections, we describe the problems raised by certain concepts underlying the model, as well as by some parts and even certain lines of the Child Support Determination Form. We look at how each specific problem case fits into the model; we also point out the corresponding legislation, the perplexing issues that are raised and, if applicable, the relevant case law (Appendix 16). Lastly, we include the Committee’s observations concerning the issues it has confronted and the recommendations that it has put forward for each case.

A number of the model’s underlying concepts, along with many aspects of the form, are problem free, or are of such a technical nature that they provide no theoretical content which the Committee could discuss. These components are simply not addressed in the report.

RECOMMENDATIONS MADE DURING THE COURSE OF THE MANDATE

Before tabling its final report, the Follow-up Committee took the opportunity to change a few aspects of the Regulation, thus addressing some of the isolated problem areas identified during its deliberations. Then, during its sessions of June 22, September 8 and October 6, 1999, the Committee adopted certain recommendations that it in turn submitted to the Minister.

Since the Committee had not yet tabled its final report when it submitted these recommendations, it follows that their submission did not affect fundamental aspects of the model. In fact, the recommendations basically target the Child Support Determination Form found in Schedule 1 of the Regulation; these proposals are included in appendices 8 to 10 of the report.

1. In the first place, the Committee recommends that three more categories of custody be added to Division4 of Part5 of the form. The Committee has observed that their absence causes problems for users of the model, who are unable to find their own specific situation outlined in the form. The proposed new Division4 would establish the following four types of custody (see Appendix10):

   1. both “sole custody” and “shared custody”;
   2. both “sole custody” and “sole custody with visiting and prolonged outing rights”:
   3. both “sole custody with visiting and prolonged outing rights” and “shared custody”; and
   4. simultaneous “sole custody,” “sole custody with visiting and prolonged outing rights” and “shared custody.”

   The latter three types of custody arrangements have been added to the first category, which was already outlined in the form. A minimum of two children is required for the first three types of custody arrangements to apply, whereas the fourth category pertains to a minimum of three children. These additions would serve to cover a wider range of situations and make the model easier to apply while reducing the risk of error for users.

2. The Committee recommends that an error of logic found in Division4 of Part5 of the form be corrected. It would appear that the calculation procedure does not take into account certain sums listed by one or another of the parents when determining annual support payments. Thus, in certain circumstances, parents may not be properly compensated. The Committee proposes that a new Division 4 be incorporated to take into account all sums listed by both parents. For instance, Appendix 8 clearly shows that the current form does not properly calculate support payments for a certain specific situation, one involving three children where the father has sole custody of one child and custody is shared in the case of the other two (cf. lines 545 and 551 of the form). The father’s annual support payments ($976.67) are not reduced by the amount of support that the mother pays him for the child of whom he has sole custody ($488.33). The same example is presented at Line 563 of the revised form as it appears in Appendix 9. It will be noticed that the father is now meant to pay $488.34 in annual support payments, rather than $976.67 as previously established.

3. The Committee recommends that the form be modified so that annual support payment contributions appear under one of the available payment-period plans. The recommended changes can be found in the proposed new Part8 of the form. The Committee noted during its deliberations that sometimes the sums attributed are listed on an annual basis (amount indicated in the table), the parties having neglected to divide this amount into instalments and to indicate the due date of the first payment. These changes will make the model more complete, as well as more user friendly.

4. The Committee recommends that the form clearly indicate that expenses listed at lines403 to 405 (child care expenses, post-secondary education expenses and special expenses) are net expenses, as outlined in section 9 of the Regulation. This involves reminding the user of an important component of the model, and the reminder would appear in the form with the additions, at the end of lines 403, 404 and 405, of the word “net.” The Committee has concluded that it is important to underscore this fact for users by making direct mention of it in the Child Support Determination Form, thus reducing the risk of ambiguity.

5. The Committee recommends that a concrete change be made to the table (ScheduleII of the Regulation) so as to correct a small mistake appearing in the initial calculation of a certain particular sum. The error has appeared ever since the table was first published, and has persisted even as the amounts were indexed in January 1998 and 1999. Hence, in the 1997 table, for a person with a disposable income of between $66,001 and $68,000 and one child, the amount should read $7,190 instead of $7,090. Indexed in accordance with the Regulation, this amount should now have reached $7,520 (as of January 1, 2000) and not $7,400 as currently indicated.

6. Part5 of the new form proposed by the Committee would include a second explanatory note with respect to shared custody outlining the possibility of an adjustment if the basic parental contribution payments are not met by each of the parents based on the custody distribution factor. For instance, parents could reach an agreement stipulating that the mother alone will purchase all the children’s clothing. Such a situation would call for an adjustment of the annual support payments. The proposed explanation would be included in the form itself in order to make the latter clearer and more user friendly.

7. It is recommended that a question be added in order to identify the person who actually completed the form, i.e. to show whether it was filled in by the father, the mother, by both parties or as established by a judge. With this information, it will be easier to process the forms pertaining to each case by clearly identifying their origin. The proposed change should also reduce the risk of confusion and make the model that much more effective.

8. The Committee also believes that the form should be changed from a legal to a letter format in order, once again, to make it more user friendly. Parties before the court are likely to be more familiar with the letter format, and this change would reflect the Committee’s concern with ensuring that users’ needs be met. In addition, this format would make it easier to use the tools required for applying the model, such as calculation software, and also make the form easier to print.

9. The Committee recommends that a box in which both parents can include their share of the total amount recorded at lines 403 to 405 be added to Part4 of the form, placed outside of the calculation area. This proposed change arises out of the Follow-up Committee’s desire to make this information stand out visually, i.e. to highlight data which one cannot easily identify in the form as it currently stands. Established rules for determining child support payments will nevertheless remain intact, the additional data being provided for information purposes only. In fact, only the total amount for both parents listed in the aforementioned lines will be used to determine support payments, in accordance with current practice.

10. The Committee also believes that it would be useful to change Line702 of Part7, a part of the form reserved for calculating the difference between the level of support as established in the form and that determined by an agreement between the parents. As opposed to the method of calculation provided in the current form, the approach proposed in the new Line 702 would allow for a negative difference when the agreement reached by the parties establishes a level of support below the sum obtained after the method of calculation outlined in Part5 has been applied.

11. The Committee recommends a few changes in terminology, to make certain terms more appropriate or their use more grammatical, or to bring the language of the form in line with changes made by other government departments.

12. The new version of the form appears in Appendix 10 of the report as part of the Committee’s recommendations. Included are certain proposed changes in format and layout to make it easier to use and understand and thus to reduce the risk of user error.

13. Lastly, the Committee believes that it would also be appropriate to include a transitional provision stating that the proposed changes do not apply to pending applications. Other applications that could also be exempted from the new procedure might include joint applications filed after its coming into force if the parties based their agreement on the method of calculation provided in the previous form, and if they submit a formal exemption request. The courts could also be empowered to override the provisions of the new form.

PART 2—STATEMENT OF PARENTS’ INCOME

CONTEXT

The Concept of Annual Income

Annual income, as defined in section 9 of the Regulation, represents one of the fundamental parameters of the Quebec model for the determination of child support payments.

The annual income of each parent is determined by applying the method of calculation found in Part 2 of the form; the parents’ disposable income can then be worked out and recorded in Part3.

From the outset, it is important to underscore the fact that this concept of annual income is nearly identical to the one applied before the model came into force. If we leave aside the specific exceptions found at Line 208 of the form (government family transfers, income security benefits and APPORT benefits), the concept is essentially the same as the one included in Form II: “Statement of Income and Expenditures and Balance Sheet,” as provided in what was once Rule 21 of the Rules of practice of the Superior Court of Quebec in family matters (now Form III, rules 26 to 30 of these rules of practice; see Appendix 11).

Furthermore, unless otherwise stated in the Regulation, the calculations carried out in Part2 involve gross rather than net income. Since the support payments listed in the table are based on gross income, it is only logical that the same procedure should hold for the calculation of the amounts actually applicable:

Income is considered gross income, unless otherwise indicated in the Regulation. In fact, the amounts listed in the table were determined according to family expenditures by gross income bracket (while the expenditures in question were, of course, made using the family’s disposable, i.e. after-tax, income).[9]

The Regulation also stipulates that the income considered is that of the current year, unless the use of that reference period is not advisable given the circumstances. In the latter case, the Regulation states that the income is the income foreseeable for 12 months following the filing of the application.[10]

The Regulation does not create an airtight concept of income, one that is to be interpreted in a restrictive manner. In fact, the use of the expression “in particular” has meant, from the outset, that all sources of income should normally be taken into account and used in determining the basic support contribution:

Given the open-ended scope of this definition, along with the very use of the words “in particular,” all sources of income must be taken into account in order to determine basic support contributions. Thus, as soon as one of the parents receives any income from any source whatsoever, this amount must be included, unless subject to a clearly defined exemption.[11]

Sources Not Included When Calculating Income

Even though the new guidelines for determining support have not changed the concept of income in any major way, they do nonetheless clearly indicate that certain sources of income are not to be included in the calculation of both parents’ income.[12] These include government family transfers (for example, federal and provincial family allowance benefits), financial assistance benefits of last resort and APPORT program benefits. As a rule, beneficiaries of these programs (with the exception of federal family allowance recipients) earn less than Quebec’s minimum taxable income.

In contrast to the aforementioned concept of open-ended income, this list of exemptions is very clearly defined and circumscribed. A careful reading of section 9 suggests that the courts have no discretionary power to add other sources of income to the list.[13]

Judicial Discretion with Respect to Determining Income

As a means of ensuring that all child support orders are issued in accordance with the model for the determination of child support payments, article 825.9, C.C.P., stipulates that parents have a duty to complete the Child Support Determination Form, in particular by declaring their respective incomes and assets, and to include the prescribed documents, as listed in Part2 of the form.

In addition, the courts retain broad discretionary powers to compensate for any missing elements in cases where the information appearing in the form or the prescribed documents is incomplete or contested. This judicial discretion is applied, for instance, in order to establish the respective incomes of the parties.[14]

LAW, REGULATION AND FORM

Code of Civil Procedure

825.8

The Government, by regulation, shall establish standards for the determination of the child support payments to be made by a parent, on the basis of the basic parental contribution determined in respect of the child, of the child care expenses, post-secondary education expenses and special expenses relating to the child and of the parents’ custodial arrangement in respect of the child. The Government shall prescribe the use of a form and of a related table determining, on the basis of the parents’ disposable income and the number of children, the basic parental contribution, as well as the production of evidentiary documents.

825.9

No application relating to child support may be heard unless it is accompanied by the form prescribed for the determination of child support payments, duly completed by the plaintiff, and by the prescribed documents.

Likewise, no contestation of the application may be heard unless the prescribed form has been produced with the prescribed documents by the defendant. The court may, however, relieve the defendant from his default on the conditions it determines.

The rules provided in this article do not apply to a plaintiff or defendant who is not a parent of the child.

825.12

If the information stated in the prescribed form or prescribed documents is contested or incomplete or if the court considers it necessary, it may make good the deficiency and, for instance, establish the income of a parent. In establishing the income of a parent, the court may have regard, among other things, to the assets held by the parent and attribute to those assets the production of such income as it sees fit.

Regulation respecting the determination of child support payments

9. For the purposes of these Rules, including the related form and table, “annual income” means income from any source, in particular wages, salaries and other remuneration, support paid by a third party and received for one’s own needs, employment insurance benefits and other benefits granted under a statutory pension or compensation plan, dividends, interest and other investment income, net income from rental activities and net income from the operation of a business; notwithstanding the foregoing, this definition excludes government family transfers, benefits granted under the parental wage assistance program and income security benefits;

...The income considered is that of the current year, unless the use of that reference period is not advisable given the circumstances, in which case the income is the income foreseeable for 12 months following the filing of the application.

The Determination of Child Support Payments Form, Lines 200 to 207

• 200—Gross salary (attach pay slip)
• 201—Commissions/tips
• 202—Net income from a business or self-employment (attach financial statements)
• 203—Employment insurance benefits
• 204—Support paid by a third party and received for one’s own needs
• 205—Retirement, disability benefits or others
• 206—Interest and dividends and other investment income
• 207—Net rents (attach a statement of income and expenses respecting the immovable)
• 208—Other income (except family government transfers, income security benefits and APPORT benefits)
• 209—TOTAL (add lines 200 to 208)

PROBLEM AREAS

The Concept of Gross Income

1. A first problem area concerns what sources of income should be listed in the form. Some parties before the court have, in fact, asked us why gross rather than net (after-tax) income is used to determine support payments, pointing out, in particular, that they themselves have to “live on their net rather than their gross income.”

2. Another problem arising from this concept of income concerns just what to include in the annual income to be listed in the form. Case law has, as a rule, interpreted this concept very broadly, apparently in accordance with the will of Quebec’s lawmakers. However, the question that arises is whether or not the prevailing interpretation is actually too broad, and, if so, what other restrictions or exemptions should be added in order to meet the objectives of the model with respect to the concept of income. Suggestions for exemption, and other contentious issues, include:

   • business income, rental income and depreciation allowances
   • income from loans and bursaries
   • other non-taxable income, such as CSST (Commission de la santé et de la sécurité de travail) [workers’ compensation] benefits
   • the handling of family allowance benefits, which are listed as exceptions at Line 208

3. In addition to underlining the aforementioned problems, some parties before the court have criticized the method of determining income in cases involving:

   • the addition of a second income to improve the financial situation of the of support payer and his or her second family;
   • the taking into account of overtime earnings;
   • a new relationship established by the parent receiving support; and
   • the calculation of income for self-employed, part-time or seasonal workers.

4. Lastly, one party complained about the fact that family allowance payments are not included in the income of the custodial parent.

VARIATION OF THE CASE LAW

As indicated above, the concept of income is currently interpreted in a very broad manner. As a rule, the court will hold that the sources of income listed in section 9 of the Regulation are to be considered as a list of suggestions, not as exhaustive:

The Court notes that the terms used suggest that the provisions are not exhaustive, instead that an enumeration or description is contained therein, as opposed to an exhaustive definition. This listing of sources of income does however limit judicial discretion to assess each case based on the evidence at hand.[15]

Furthermore, generally speaking, the case law upholds the principle that the list of exemptions with respect to sources of income is exhaustive, and, consequently, that it is not possible to add other sources of income to this list.

The following decisions deal with the adding of certain sources of income to the annual income of the parties in question:

• Droit de la famille—3026, J.E. 98-1340 (C.A.)
  (Retirement income)
• Droit de la famille—2873, J.E. 98-207 (C.A.)
  (Compensation for sick leave)
• Droit de la famille—2849, J.E. 98-92
  (Use of automobile)
• Droit de la famille—3309, J.E. 99-1117
  (Use of automobile and performance bonus)
• Droit de la famille—2931, J.E. 98-680
  (Financial assistance from a relative and capital gain)
• Droit de la famille—3051, 98 B.E.-785
  (Business-related tax benefits)
• Droit de la famille—2776, J.E. 97-1874
  (Job-related benefits)
• Droit de la famille—3069, J.E. 98-2130
  (Earnings from the debtor’s business)
• Droit de la famille—3135, J.E. 98-2183
  (Disability benefits)

Some decisions clarify the way certain sources of income should be considered when determining the parties’ total income.

• Droit de la famille—2797, J.E. 97-2047
  (With respect to stock market investments, only dividend income is included)
• Droit de la famille—3017, J.E. 98-1399
  (Determination of gross annual income based on net profits)
• Droit de la famille—3344, J.E. 99-1358
  (Determination of gross annual income based on net profits of the debtor’s company)
• Droit de la famille—2827, [1997] R.D.F. 826
  (Determination of gross income of an Aboriginal person paying no income tax)
• Droit de la famille—2910 98, B.E.-212
  (Determination of foreseeable income)
• Droit de la famille—2883, J.E. 98-378
  (Determination of gross income based on health insurance benefits considered as a source of net income)
• Droit de la famille—2962, J.E. 98-907
  (Given the debtor’s assets, income upon which to base calculations of support payments is established as being income for the current year, in spite of loss of job)
• Droit de la famille—3038 98, B.E.-725
  (The court cannot determine support to be paid in advance in case of future job loss)
• Droit de la famille—3390, J.E. 99-1760
  (Disability benefits are included without their gross value being determined)

In the following decisions, some sources of income have been exempted, or certain benefits, not taken into account.

• Droit de la famille—2718, J.E. 97-1523
  (Reimbursement of contributions to a pension plan)
• Droit de la famille—2520, J.E. 99-1023
  (Depreciation allowance)
• Droit de la famille—2827, [1997] RDF 826
  (G.S.T. and Q.S.T.)
• Droit de la famille—2905, J.E. 98-571
  (Allowance for entertainment expenses in a foreign country)
• Droit de la famille—3135, J.E. 98-2183
  (Night-time premiums and overtime earnings having become very unlikely)

In a number of cases, judges have decided not to reduce or cancel support payments when the loss of income clearly resulted from a conscious decision made by the parent paying support. On the other hand, in another decision, the court ruled that the support payer had a legitimate right to keep one job only.

• Droit de la famille—3140, J.E. 98-2131 (C.A.)
  (Sabbatical leave)
• Droit de la famille—3289, J.E. 99-916
  (Reduced workload)
• Droit de la famille—3359, J.E. 99-1407
  (Reduced workload)
• Droit de la famille—3210, J.E. 99-274
  (Sabbatical leave)
• Droit de la famille—3278, 99 B.E.-449
  (Sabbatical leave)
• Droit de la famille—2968, J.E. 98-908
  (Retirement)
• Droit de la famille—2841, J.E. 98-1589
  (Retirement)
• Droit de la famille—3383, J.E. 99-1666
  (Retirement)

OBSERVATIONS

Table 3 in Chapter 4 shows that the total average income for both parents is $44,208, whereas the median income (i.e. in 50% of cases the income is lower and in 50%, higher) is $39,690. The father’s median income is $27,040, as opposed to $9,490 for the mother. Total income is below $45,000 in 59% of all cases, and is above $100,000 in only 4% of cases. As previously mentioned, gross income does not include government family transfers, income security benefits and APPORT benefits.

The majority of practitioners who having completed the survey consider that the model works well with respect to “determining income.” Moreover, it should be noted, and has already been indicated, that this concept of income remains virtually the same as the one in force before the model was adopted. In addition, certain respondents point out that problems still arise concerning how to determine the income of self-employed workers.

Thus the problem areas that need to be examined are linked to other aspects of Part2.

The Concept of Gross Income

The Table to Determine the Basic Parental Contribution is based on a survey of household expenses. From the survey, it is possible to obtain various sources of income (transfer payments, work income and other sources of income) as well as the types of expenses incurred, by household and by income bracket (goods and services, income taxes, various mandatory deductions, RRSPs, etc.). The table has been developed on the basis of gross income and in taking only expenditures for goods and services into account.

It definitely seems simpler for the user, especially a party before the court, to determine gross income based on figures currently provided in the model. This way of proceeding makes using the model simpler given that the table already takes matters of taxation into account. The model could, of course, have been developed in such a way as to take the particular tax situation of each party into consideration, using a form not unlike the Ministère de Revenu’s tax return, but the results would have been similar and the calculation process, more complicated.

However, it is not unreasonable to suggest that certain mechanisms for revising the model be put in place in order to take into account any significant changes in a person’s tax load. The Committee notes that, as things currently stand (and with the exception of the legal duty to evaluate the model within three years of its coming into force), the lawmakers have established no mandatory procedure leading to the development of a mechanism for revising the model, so that it might take significant tax load changes into consideration.

Business Earnings, Rental Income and Depreciation Allowances

It may happen that net income from a business (Line 202) and net rents (Line 207) are listed as negative income. There are good reasons to continue to allow the filing of negative net company earnings and negative rental income given that a parent’s ability to pay is linked to real losses incurred during the year. Furthermore, article825.12, C.C.P., provides for this very eventuality by allowing the court to include in its assessment, among other elements, assets held by the parent relative to the total income listed at Line 209 of the form.

With respect to the question of depreciation allowances, it is difficult to adopt a firm position considering all the various possibilities the issue opens up, for instance, whether or not depreciation allowances should be taken into account, given that each situation is likely to be different and that, in the absence of an agreement between the parties, the courts have been empowered to analyse the situation and to reach a decision on a case-by-case basis.

A depreciation allowance is an accounting concept, while a capital cost allowance is its fiscal corollary. Calculating both for the same situation often leads to the same result, but in cases where the result is different, it is essential to know the reasons why. For example, according to generally accepted accounting procedures, a certain type of equipment will often be amortized on a linear basis given its lifespan in the company. In this instance, from the taxation standpoint, the company’s capital cost allowance will either be larger or smaller, depending upon the tax provisions applicable to the equipment in question.

As it happens, lawmakers justify any discrepancy between the two on the basis of economic criteria pertaining to this particular type of equipment or to the sort of company to which it belongs. Thus at issue here are tax incentives designed to promote (or not to promote) a type of company or category of equipment; the tax advantage either granted or reduced has absolutely no bearing on lifespan, that is, on book depreciation.

With respect to calculating income, section 11 of Schedule III of the federal guidelines stipulates that the capital cost allowance for real property claimed by a spouse must be added to his or her income as stated in Line 150 of the federal income tax return form. The Quebec model, for its part, does not address this issue. Now, it is clear that neither a depreciation allowance nor a capital cost allowance actually represents an expense; each is, in fact, only a tax deduction. According to a number of practitioners, this deduction should not be included in the calculation of a parent’s income, whereas others argue that the deduction cannot be dissociated from business income.

The Committee was unable to delve more deeply into this aspect of the debate. Nevertheless, given the significant number of self-employed workers in question, the impact of the issue should be studied further.

Loans and Grants

The basic underlying principle of the Quebec government’s student loans and grants program is that all students must provide for their own schooling in proportion to the means at their disposal. Thus the loans and grants awarded to a given individual are determined according to the person’s financial resources and the school-related expenses incurred. Financial assistance is provided, in the first place, in the form of a loan to be repaid after the recipient’s studies have been completed. A grant may also be included, if the loan proves inadequate to cover eligible expenditures.

Eligible expenditures for the purposes of determining student loans and grants mainly include school-related expenses, living expenses and transportation costs, as well as additional living expenses for single-parent families. Living expenses have been pegged at a maximum of $158per week, for an annual total of $8,216, while the supplement for single-parent families is $1,995, leading to a grand total of $10,211, an amount slightly higher than the basic exemption of $9,000.

The Committee believes that such government financial assistance should not be included in the calculation of parental income. In fact, student loans and grants merely serve to supplement the recipient’s resources and, for all intents and purposes, represent a form of last-resort financial assistance. Accordingly, specific loans and grants provided by Quebec’s Ministère de l’Éducation as part of its student assistance program should be included in the list of exempted sources of income, along with last-resort financial assistance benefits, government family transfers and APPORT program benefits.

Family Allowance Benefits

As already noted, the model stipulates that government family transfers are not to be included in parental income for the purposes of determining child support payments. In fact, these transfer payments are used especially to meet the needs of children, as are support payments, and, for low-income families, they represent an important form of compensation for the relatively low support contributions listed in the table, amounts that take both parental resources and the number of children into account. Basic parental support contributions are directly based on the income of both parents so it follows that the lower their respective incomes, the lower the contributions as established in the table. Family allowance and child tax benefits serve to supplement the relatively low incomes of these parents.

Incidentally, calculations of family allowance benefits take into account taxable support payments, but not those exempted from tax treatment, as has been the case for child support payments determined since May 1, 1997.

If government family transfers (such as family allowance and child tax benefits) were to be included in the model for calculating child support payments, support contributions would obviously decrease.

Family allowances and other family-related transfers are distributed according to the type of custody arrangement that has been established. These benefits are not subject to a prescribed sharing plan, but in cases where federal benefits are sent to recipients on an alternating basis, the provincial government follows the same distribution pattern.

During the family mediation process, some couples draw up a series of scenarios that take into account net family income and various types of custody arrangements. After reviewing the range of possibilities, former spouses then decide on the arrangement that best suits their situation.

With respect to the management of social transfer programs, some people suggest that the interested parties themselves should have the right to manage the sums that they receive. If this were the case, the Régie des rentes and Quebec’s Ministère du Revenu would be in a position to respect the court-approved decision of the parties.

A majority of Committee members believe that family allowance and other family-related benefits should not be included when calculating support payments. For cases of shared custody, the Committee considers that the lower-income parent should receive child-related transfer benefits (the Canadian child tax benefit and Quebec family allowance), unless the interested parties or the presiding judge decide otherwise, in which case government officials would automatically be required to comply.

Other Taxable Income

The model is applied to the gross income of the parties in question. As already mentioned, the Committee does not feel that changes are needed in this regard. In reaching their decisions, the courts have in fact taken non-taxable income into account. They have, quite rightly, argued that a larger gross income should be recorded for recipients of non-taxable income and that the appropriate amount should be listed in the form, along with an indication that this income has not been subject to federal or provincial taxation.

THE COMMITTEE RECOMMENDS THAT:

• The current concept of gross income be maintained in calculating child support payments.
• The information brochure for the model be re-designed in order to add, to the general information already provided, a section explaining each line of the form, such as is found in the income tax return guide.
• The information brochure include an explanation of how gross income has been taken into account in relation to the actual design of the table.
• The Regulation, and not merely the form, stipulate that the pertinent documents must be provided.
• The Minister of Justice develop mechanisms to provide for an on-going assessment of the model, in particular as a means of taking into account any major changes in individual tax loads.
• Lines 202 and 207 of the form accompanying the Regulation be changed as follows:

  202—Net income from a business or self-employment (gross income less expenses related to the business or to self-employment)
  207—Net rents
  (gross income from rental activities less expenses related to the rental of an immovable)

• The Ministère de la Justice pursue the variation initiated by the Committee concerning how to deal with depreciation allowances.
• The definition of “annual income” as provided in section9 of the Regulation be changed so that loans and grants awarded under the Quebec Ministère de l’Éducation’s student financial assistance program be excluded when calculating parental income.
• The rule applying to shared custody cases stipulate that the lower-income parent should receive child-related transfer payments (the Canadian child tax benefit and Quebec family allowance), unless the interested parties or presiding judge decide otherwise, in which case government officials would automatically be required to comply.

PART 3—CALCULATION OF PARENTS’ DISPOSABLE INCOME

CONTEXT

The parents’ disposable income is established in this part of the form, based on the annual income determined in the previous section.

In calculating disposable income, all deductions outlined in the Regulation should be subtracted from the parents’ total income. These deductions include the basic deduction, as well as deductions for union and professional dues.

Once the disposable income of each parent has been determined, the disposable income of both parents is established simply by adding together the disposable incomes of each.

Using these two amounts, it is now possible to determined the distribution factor (%) of income. This involves establishing the annual disposable income of each parent as a percentage of the total annual disposable income. The distribution factor thus calculated will henceforth be used throughout the entire child support determination process in order to ensure that the obligation to provide support will be assumed by both parents according to the actual distribution of their respective incomes.

At this point, it is important to recall the objective of the basic $9,000 deduction, which is to allow parents to meet their own essential needs. Because of this deduction, a worker with an income equivalent to last-resort financial assistance benefits is not required to provide support.

The basic deduction—as well as those for union and professional dues, combined with the “capacity-to-pay-of-debtor” stipulation appearing in Part 6—serves to illustrate two basic principles underlying the model, that of “giving priority to the paying parent’s support obligation with respect to expenditures exceeding his or her own essential needs” and of “maintaining as far as possible the incentive for disadvantaged parents to meet their support obligations to their children.”

In 1997, the basic amount needed to meet a parent’s essential needs was calculated as accurately as possible, by including the following elements:

1. The basic income-security benefit ($6,480)
2. The deduction for a person living alone ($1,200)
3. Contributions to the federal employment insurance program and Quebec’s Régie des rentes ($419)
4. The deduction for job-related expenses ($300)
5. The federal income tax to be paid ($227)[16]

LAW, REGULATION AND FORM

Regulation respecting the determination of child support payments

9. For the purposes of these Rules, including the related form and table,…

“disposable income” means the annual income, less the amount mentioned in Part3 of the form as the basic deduction and deductions for union and professional dues.

Child Support Determination Form,lines 300 to 307

• 300—Annual income (line 209)
• 301—Basic deduction
• 302—Deduction for union dues
• 303—Deduction for professional dues
• 304—Total of deductions (add lines 301 to 303)
• 305—Disposable income of each parent (line 300—line 304) Enter 0 if negative
• 306—Disposable income of both parents (add the amount of line 305)
• 307—Distribution factor (%) of income
• Disposable income of father (line 305 ÷ line 306 X 100)
• Disposable income of mother (line 305 ÷ line 306 X 100)

PROBLEM AREAS

One party before the court suggested to the Committee that the parents’ disposable income should be determined after all mandatory contributions have been deducted (income tax, Régie des rentes, employment insurance, pension fund, etc.). This issue is addressed in the section of the report pertaining to Part2 of the Form.

A practitioner pointed out to the Committee that the basic $9,000 deduction is insufficient since a homeowner, in his view, spends approximately $15,000 to $18,000 per year for house-related expenses, food, clothing, taxes, insurance, loans, etc.

The particular problem area with respect to the basic deduction revolves around whether or not this deduction should be increased, i.e. is the deduction realistic given the current economic situation? By the same token, the issue of whether and how to index the basic deduction must be examined, i.e. is it appropriate for the deduction to be adjusted on an on-going basis? (See the section of the report dealing with indexation.)

OBSERVATIONS

The data-collection process described in Section 3.2.3 of Chapter 4 of the report has shown that union or professional dues are recorded along with the basic deduction in only 20% of all forms submitted, with no significant percentage difference between mothers and fathers noted in this regard. In the eyes of Committee members, this figure logically, seems relatively low, and neither the data nor the surveys provide a satisfactory explanation for the phenomenon.

As the data in Section 3.2.4, show, the average disposable income of both parents is $29,953. With respect to the median income of both parents, it is below $24,443 in 50% of all cases ($18,000 for the father and $318 for the mother). In fact, the disposable income of both parents is lower than $45,000 in 79% of all cases, and this income is used to determine the basic parental support contribution, as provided in the table and recorded at Line 401 of the form. Data on the distribution factor of the parents’ disposable income, as recorded at Line 307, show that in 48% of cases the father is the sole provider of support and that in 39% of cases he pays between 50% and 99% of all support.

These results are hardly surprising given that the father’s income is, as a rule, higher than the mother’s. Nevertheless, it should be pointed out that the income used in determining the basic parental support contribution to meet the children’s needs is not very high to begin with. In order to obtain the parents’ disposable income, certain deductions have been provided for (in Part3 of the form), as a means of taking into account the essential needs of each parent and the loss of economies of scale resulting from the break-up of the couple. It should be recalled that the model provides parents with a basic $18,000 deduction to be applied to their combined total income (at Line 209), so long as both parties have an income equal to or above $9,000, obviously. Where applicable, union or professional dues are also deducted from the parents’ disposable income.

It is important to clarify that these data are obtained by applying the specific guidelines included in the model. The information thus derived serves to illustrate a number of principles that underlie and are indeed an integral part of the model itself (in particular the various sections of the Child Support Determination Form), as our report has carefully pointed out. Moreover, the great majority of lawyers, mediators and special clerks agree with the principle that the paying parent’s support obligation should be given priority in the model as opposed to expenditures exceeding his or her own essential needs.

When surveyed, a number of lawyers and mediators pointed out that the basic deduction was insufficient. This issue will be addressed in the section dealing with indexation.

Furthermore, the concept of disposable income has been poorly understood by a certain number of people, who wrongly equate the term with net income, even though a simple variation of Part3 reveals that disposable income is not net income, but rather the basic income used to calculate support payments when the model is applied. Thus the concept of disposable income should definitely be clarified both in the model’s information brochure and in the Child Support Determination Form.

THE COMMITTEE RECOMMENDS THAT:

• The Regulation be amended to include the following phrase in the title of Part3 of the form: Calculation of the parents’ disposable income for purposes of calculating support contributions.
• The concept of disposable income be more clearly explained in the model’s information brochure.

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