Generally, the starting point for determining Guideline income for child support purposes is a party’s total income as set out in their income tax return. However, section 19(1) of the Federal Child Support Guidelines (CSG) allows for the imputation of income to a party (payor or recipient, although more commonly the payor). Where appropriate, the Court may assign income to a party over and above their stated tax return income, with that imputed income used to determine child support obligations. Attempts to impute an income often arise when someone is unemployed, underemployed, suspected to be paid in cash, and in other similar circumstances.
The former legal test for the imputation of income in Alberta was more restrictive than in other Canadian provinces. This former test was governed by the Alberta Court of Appeal (ABCA) decision in Hunt v. Smolis-Hunt, 2001 ABCA 229, where the Court interpreted CSG s. 19(1) to require the “deliberate intent” of a party to avoid/lessen a support obligation for income to be imputed. Subsequent Alberta caselaw interpreting Hunt broadened this standard to some extent to include actual or inferred deliberate intent, but the test remained stringent in Alberta.
In Peters v. Atchooay, 2022 ABCA 347, the ABCA overturned Hunt and brought Alberta into lockstep with other provinces by applying a new (for Alberta) test of reasonableness when considering the imputation of income for support purposes.
In Peters, the ABCAgave four reasons for its reconsideration of Hunt:
- There is nothing in the wording of section 19(1) that required a deliberate intent to evade.
- The application of the deliberate evasion test is “impractical and unworkable”.
- The approach in Hunt is not in line with the new Divorce Act and Child Support Guidelines. Instead, it should be modernized and child-centric. Furthermore, having to prove intent to evade child support obligations requires continued conflict between the parents.
- Finally, “Alberta is wrong; the rest of the Canada is right” (para. 42).
Peters sets out the new test for imputation of income:
- First, is the party intentionally underemployed or unemployed? The Court will examine all relevant factors and consider if the circumstances surrounding a party’s income are beyond that party’s control. The factors to consider include the age of the payor, their earning capacity, and their qualifications.
- Second, do any listed exceptions in CSG s. 19(1)(a) apply? These exceptions are the needs of a child of the marriage and/or the reasonable health and educational needs of the payor. These exceptions, if applicable, are not automatic or permanent, and will be determined based on the circumstances of each case.
- Third, if a payor parent is found to be intentionally underemployed or unemployed and they are not saved by a recognized exception from section 19(1)(a), should judicial discretion be exercised to impute income? If yes, the Court then may impute income.
Peters reverses the burden of proof from Hunt. Previously, the recipient had to prove that income should be imputed on the intention test. Now, the payor must establish that their income is reasonable. This is a practical approach as it is the payor who has the “insight and influence into that employment decision.”
Peters reinforces that the child’s well-being is the priority: “a parent’s personal goals and lifestyle choices do not take priority over their obligation to financially support their children.” While parents will continue to control their employment and income choices (arguably a predominant consideration in the old test under Hunt), those choices will now be viewed from a reasonableness lens as opposed to a lens that focuses on a party’s intentions.
Notably, the court wrote that a “high-income earning and sole provider… is not necessarily shackled to that exact lifestyle upon separation for the rest of their working life.” In addition, where a parent takes on more parenting obligations post-separation, “those new parenting obligations must be factored into the equation”.
In addition to providing the new test for income imputation, the ABCA provided a non-exhaustive list of guiding principles:
- There is a general duty to work: “A parent’s limited work experience or job skills do not justify a failure to pursue lower skilled employment or employment in which the skills can be learned on the job.”
- The starting point of assessing reasonableness is a payor’s earning capacity.
- The court has discretion. Reasonable decisions made by a parent who earns less than the maximum of their earning capability do not require imputation.
- The obligation to support children is the overarching goal. A parent cannot be excused from support obligations to further unrealistic or unproductive career goals.
- Agreements made between spouses before separation about parenting arrangements are relevant but not necessarily determinative.
- What is reasonable at one point in time may not be reasonable in the future.
- The ultimate onus rests on the party opposing imputation to prove that the unemployment/underemployment was involuntary or was a result of a listed exception. If neither apply, the party must establish that the underemployment/ unemployment is reasonable, having regard to all circumstances.
The stringent “deliberate intent” test from Hunt no longer applies. Peters provides a new framework to address the issue of an intentional unemployment or under-employment, arguably easing the burden on parties who seek this relief in the context of support obligations.