Imputing Income When Under-employed or Unemployed

Section 19(1) of the Federal Child Support Guidelines provides some guidance on when income may be imputed in appropriate circumstances, some of which include:

1. intentional under-employment or unemployment, other than where required by the needs of a child of the relationship or health needs of the spouse
2. when exempt from paying federal or provincial income tax
3. when living in a jurisdiction that has effective tax rates significantly lower than in Canada
4. when income appears to have been diverted which would affect the child support payable
5. when property is not reasonability utilized to generate income
6. when income information has not been provided when under a legal obligation to do so
7. unreasonable deduction of expenses from income
8. when a significant portion of income is from dividends, capital gains or other sources that are taxed at a lower rate than employment or business income or are exempt from tax
9. when a beneficiary under a trust or in receipt of income or benefits from the trust

In Peters, the Court of Appeal revises the test for imputation under the first factor, in a situation where someone is intentionally under-employed or unemployed.  Peters changes the test from the very stringent intentional course of conduct for the purpose of defeating support obligations to a reasonableness standard.  The reasonableness standard aligns Alberta with the rest of Canada for imputation of income.

Intentional under-employment or unemployment is the most commonly disputed ground for imputation.  Some factors the Court considers include a duty of a parent to seek employment when they have the ability to work, their earning capacity, the justification for the change in employment, obligations to support their children, previous agreements and the length of time that has passed.  The Court also notes that while an involuntary change in employment may not justify imputation, there is a reasonable amount of time that can pass before one would be expected to find work and imputation may then be available.

This decision is a marked departure from the previous test for imputing income in Alberta, lowering the bar to permit more discretion by the Court in imputing income.  Reasonableness is a welcome change for many in Alberta, but with it an additional introduction of subjective factors.  We can expect to see more successful arguments of imputing income in Alberta in the future.