2006 Amendments to the Federal Child Support Guidelines

Determination of the Income of a Non-resident – Section 20

The amendment to section 20 reads as follows:

This change addresses the anomaly that arises from the application of subsection 19(1)(c) which allows the Court to impute income to a payor living in a country with a tax rate lower than in Canada - presumably, as the lower foreign tax would lead to greater disposable income - and the former section 20 which required the Court to calculate the non-resident's income as though it was earned in Canada, that is, adjusting it for currency exchange rates. The amendment keeps in place both provisions, but adds fairness to the equation by giving the Court the discretion to take those higher rates into consideration to determine what is "appropriate" in assessing the payor's income.

Amendments to the Federal Child Support Tables

The most significant of the amendments, due to their widespread and universal impact, are the changes to the Federal Child Support Tables. The table amounts have risen, in some cases, significantly. The automatically apply in those jurisdictions that adopted the federal tables by reference. All provinces and territories that needed to amend their regulations did so by May 1, 2006. The Federal Tables will continue to work in the same way, but they have been modified to account for the changes in federal and provincial tax provisions in recent years. Based on 2004 data, the amounts have been revised to reflect the variations in tax parameters and structures which underlie the calculation algorithms that generate the table amounts.[18]

The amendments update the figures in the notes for Schedule II of the Federal Guidelines, which run through the calculation for a hypothetical British Columbia payor who earned $33,760.00 annually and supported two children. Under the previous table the monthly amount paid was $489.12. This now jumps to $525.56. At the income level of $150,000.00 or greater, that parent of two children will now pay the monthly amount of $2,061.00, plus 1.22% of the excess income, where previously it was $1,717.00 plus .99% of the excess.

For the lower income levels, the tables now create a higher threshold amount, below which no support is payable.[19] Using Manitoba as an example, the threshold of $6,700.00 in the original tables now rises to $7,999.00.

For the purposes of variation applications respecting child support orders under section 17(4) of the Divorce Act , section 14[20] of the Federal Guidelines deems certain events to be "material change[s] of circumstances". One of these, subsection (a), provides that a material change of circumstances occurs:

(a) in the case where the amount of child support includes a determination made in accordance with the applicable table, any change in circumstances that would result in a different child support order or any provision thereof;

It is expected that the amendment to the tables is such a change in circumstances. It will give rise to variation orders in respect of a child support order in cases where the application of the updated tables would result in a different child support amount, even if nothing else had changed. In those provinces where child support recalculation services have been implemented, this may have a greater practical impact, at least under provincial family law applications, given the relatively low or absence of cost to the applicant. Predictably, as the government enables recalculation services under the Divorce Act, the impact of this amendment will be much more noticeable.

Amendment to Schedule II, Step 1, Section 2 – the Undue Hardship Test

One of the few opportunities for the Courts and litigants to depart from the strict presumptive application of the support tables is the "undue hardship" provision in section 10 of the Federal Guidelines. The Court, looking at a number of factors, may find that the award of the table amounts may create undue hardship for either parent or for the child.

The Federal Guidelines insist, however, that the Court must determine that the standard of living in the household of the parent claiming undue hardship is lower than the other parent's household. The Court may, but is not required to, use the Comparison of Household Standards of Living Test, which is set out in Schedule II to the Federal Guidelines. The comparison formula is complex and involves 6 discrete steps, the first of which is the determination of the income of each income-earning person in each of the households, which will include not just the parties' income but may also include that of their partners, significant others and children.

The amendment to Step 1, in which income is calculated by subtracting from the person's income ("A") the income tax he or she pays ("B"), adds a second deduction ("C") to account for the cost of Canada and Quebec Pension Plan contributions and Employment Insurance, as follows:

STEP I

Establish the annual income of each person in each household by applying the formula 

A - B - C

where:

  1. is the person's income determined in accordance with sections 15 to 20 of these Guidelines,
  2. is the federal and provincial taxes payable on the person's taxable income, and
  3. is the person's source deductions for premiums paid under the Employment Insurance Act and contributions made to the Canada Pension Plan and the Quebec Pension Plan.

Where the information on which to base the income determination is not provided, the Court may impute income in the amount it considers appropriate.

The change brings into focus that the determination of living standards in this test is based upon disposable income. Litigants are advised to provide the evidence and prepare the calculations rather than relying on the Court to make a general finding in their favour.

Conclusion

While the amendment to the Comparison of Household Standards of Living Test in undue hardship cases adds a modicum of fairness to the calculation, it is hard to believe that it will make a practical difference in the handful of cases in which the issue is raised. The amendment to the treatment of foreign taxation, again, seems to be an effort to add fairness, but with few practical applications. The Court is not bound to credit the support payor who pays tax at a higher level than in Canada, but at least there is room for the exercise of discretion.

The amendment to the Federal Guidelines clarifying the meaning of "extraordinary expenses" is welcomed and hopefully will lead to a reduction in litigation on the issue of what is or is not such an expense. While the class of allowable expenditures to be considered has not grown, the means to have such expenses qualified has broadened.

On the other hand, the changes to the child support tables, providing for lower amounts at the lower economic levels and higher amounts as the income of the support payor climbs over $30,000.00 annually, may lead to additional litigation and, in those provinces with recalculation programs, significantly more work for the recalculation officers as people move to vary or recalculate their support payments to take advantage of the "new" tables. The change, however, dictated by economic changes over the last five years is in line with one of the objectives of the Federal Guidelines: "to establish a fair standard of support for children that ensure that they continue to benefit from the financial means of both spouses after separation."

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