In family law, the imputation of income occurs when a court finds that the amount of income a parent claims to have does not fairly reflect what they could be earning. When this happens, a judge can “impute” (attribute) a more appropriate level of income to the parent for the purposes of child support.

Section 19(1)(a) of the Federal Child Support Guidelines provides that a judge may impute income to a parent responsible for paying child support if that parent is “intentionally under-employed or unemployed”. What it means for a parent to “intentionally” fail to live up to their earning capacity has been the subject of debate in Alberta case law. However, in the recent landmark decision of Peters v. Atchooay, the Alberta Court of Appeal settled this vital issue of interpretation.

Father accumulated $122,000 in child support arrears, applied for retroactive reduction

In Peters v. Atchooay, the parents were a separated common-law couple with two children. Their relationship ended in 2013, and in 2014, the father was ordered to pay child support. The only financial documentation available when the child support payments were set was the father’s 2012 tax return.

For the following six years, the father fell into child support arrears of $122,000. In 2021, he brought an application to retroactively reduce the amount of child support owed based on his tax returns from 2014 to 2018. As he had earned less in those four years than in 2012 (the year which was the basis of the original child support order), he argued that a reduction of his support obligations was warranted. However, he had not provided any of this updated financial disclosure to the mother at any point in the preceding years.

Child support owing significantly reduced by special chambers judge

To reduce the amount of monthly child support owing, a payor parent must demonstrate that they have experienced a material change in circumstances affecting their income. At the application hearing before the special chambers judge, the father pointed to several financial setbacks he’d suffered. The judge found that this demonstrated a material change in circumstances that justified a reduction in the amount of monthly child support payable. The judge also applied the change retroactively back to 2015, lowering the total amount of support owing to $43,111.

The mother appealed the special chambers judge’s decision to the Court of Appeal for Alberta. The issues central to the appeal were:

  1. Whether the father had proven a material change in circumstances as needed to reduce his child support obligations; 
  1. The imputation of income under section 19(1)(a) of the Federal Child Support Guidelines (particularly the interpretation of the term “intentionally under-employed or unemployed”); and
  1. Whether the special chambers judge erred in retroactively reducing the child support owing back to 2015.

ABCA: Late financial disclosure, “historical decrease” in earnings not material change in circumstances

While the special chambers judge found that the father’s decreased earnings from 2014 to 2018 demonstrated a material change in circumstances warranting a reduction to child support, the Court of Appeal disagreed. The Court stated that a “historical decrease” in income, by itself, does not prove a material change in circumstances. 

Further, the Court found that the father’s drop in earnings could not be a material change as it was not proven to be caused by circumstances beyond his control. While the father submitted that his ability to earn more income was affected by his struggles with mental health issues and addiction, he did not provide any medical evidence as proof. 

The Court of Appeal was also critical of the father’s failure to provide ongoing financial disclosure to the mother over the years and cautioned that a material change in circumstances cannot be based on “eventual” and “late” financial disclosure. Additionally, even if the special chambers judge could have found a material change in circumstances, the Court of Appeal found that would only warrant a retroactive reduction back to the date of “formal and effective” notice of the change. Given the father’s lack of financial disclosure over the years, this date would only have arisen when he brought his application in 2021. Therefore, the amount could not have been reduced back to 2015.

Leading Alberta authority on imputation rejected by other Canadian courts

Before the Peters v. Atchooay case, the leading decision on the imputation of income under section 19(1)(a) of the Federal Child Support Guidelines in Alberta was Hunt v. Smolis-Hunt. The Hunt case, which the Alberta Court of Appeal decided in 2001, limited the application of section 19(1)(a) to cases where the payor parent deliberately tries to reduce or avoid their child support obligations by being under-employed or unemployed. 

Since its release, the Hunt decision has been rejected by courts across Canada. Other provincial appellate courts instead apply a test of reasonableness: how much child support is it reasonable to expect the payor parent to be able to pay, given all the relevant circumstances? In cases where the parent is paying less than that amount, courts outside Alberta consider them underemployed per section 19(1)(a), regardless of whether they intentionally evade their child support obligations.

Court of Appeal overturns Hunt, sets reasonableness standard for imputing income

The Court of Appeal acknowledged that the Hunt case does not align with a modern understanding of the best interests of the child, as secured through child support. Instead, the Court adopted the widely-accepted principle that income can be imputed to a payor parent who has minimized their earning capacity through their lifestyle or conduct without deliberately trying to avoid paying child support.

The Court of Appeal broke down the new legal standard when determining whether income should be imputed under section 19(1)(a) of the Federal Child Support Guidelines as follows:

  1. Is the parent in question intentionally under-employed or unemployed?
  1. Do the listed exceptions to imputation under section 19(1)(a) apply? That is to say, was the under-employment or unemployment required by the needs of a child of the marriage or any child under the age of majority or by the payor parent’s reasonable educational or health needs?
  1. Should the Court use its discretion to impute income, considering the circumstances of the case?

Full, honest financial disclosure still critical element of child support cases

The Court noted that the party bearing the onus of convincing the Court to impute income will vary depending on the nature of the application. However, regardless of onus, each parent is still required to make complete, honest disclosure of their finances throughout the years as required by the Federal Child Support Guidelines and the Divorce Act (as well as provincial family laws).

Mincher Koeman Provides Trusted Advice in Calgary Child Support Cases

The family and divorce lawyers at Mincher Koeman have extensive experience in child support matters and provide candid, empathetic advice to clients. We secure clients’ rights while attempting to reduce conflict throughout the process. Our firm takes a big-picture view of each family’s circumstances to assess the best way forward while always prioritizing the best interests of the child or children involved. 

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