Calculate Guideline Income

Calculating Guideline Income for Support Purposes

If you are the payor or recipient of child or spousal support in Alberta, it is important you are aware of how calculating guideline income comes into play.  While your guideline income may be the same as your Line 150 (or as of 2019, Line 15000), that is not always the case.  It is important that the proper guideline income be calculated as you may be paying too much or receiving too little support.  The Guidelines provide guidance on adjustments to make to an individual’s income as the situation requires.  People can be compensated in many different ways and not all of those forms of compensation end up on their Line 15000.  For anyone that is not a standard T4 employee, this guideline income calculation may be necessary.

Child Support Guidelines and Calculating Guideline Income

Section 15 to 18 of the Federal Child Support Guidelines provide guidance on how to calculate guideline income.  These sections cover income patterns, non-recurring losses and income adjustments to be made for an individual who is a shareholder, director or officer of a corporation and the income should be considered when determining an individual’s guideline income.

Section 16 references Schedule III of the Guidelines, which provides a number of adjustments to be made to income.  Some of the most commonly seen adjustments will be union dues, travel or motor vehicle expenses, dividends received from taxable Canadian corporations, capital gains and losses and self-employment income. 

Calculating Guideline Income With A Business

Section 18 of the Guidelines specifically contemplate being the owner of a business.  If you own a business, your guideline income is typically the most difficult to calculate.  As a business owner, you have the ability to deduct many legitimate expenses through the business that you receive personal benefit for that someone who does not own a business cannot deduct.  To get a true picture of a business owner’s income, a deeper review of the financials is necessary.  In Sweezey v Sweezey, 2016 ABQB 131, Justice Yungwirth did an extensive review of the expenses of a corporation.  The Court reviewed each expense item on the financial statements and determined if there was a personal benefit contained in that expense, how much that personal benefit would be, and adjusted the payors guideline income accordingly.  The Court added portions or all of the advertising and promotion expense, amortization, field and travel, fuel, insurance, interest on long term debt, office, repairs and maintenance, management salaries, telephone expenses, as well as the pre-tax income of the corporation.  A significant adjustment was ultimately made to the payor’s income, over three times what was showing on the Line 150 of his tax return. If you have questions about calculating guideline income to ensure you are receiving or paying the correct amount of support, it is always recommended you seek legal advice.

Written by Michael Ross

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