How Alberta Business Owners Calculate Child Support 

Divorce can be a complicated and confusing process. Between the lawyers, the paperwork, the financial strain, tracking household information, and the potential emotional distress and strain, spousal separation can be very difficult indeed. When your children or family business are entangled in the divorce proceedings, this is doubly true. If you own a business and have to calculate child support, you may be confused as to how this should be done.

Below, we will outline how child support is calculated for Alberta business owners.

How is Child Support Calculated and What Are the Rules?

The Federal and Alberta Child Support Guidelines provide guidance as to how income for minor financial supportive purposes is to be determined. However, some sections are not entirely black and white and require experience and expertise to be properly interpreted. This means a few things for you as a small business owner, corporation owner, or private entrepreneur.

1. Annual Income Must be Calculated

Generally, the income of the paying parent will be required. In some situations, however, the income of both parents will be needed. To calculate annual income, you will need to look at your income tax returns as well as all financial business statements that you have on hand. The Government of Canada website has additional information available on how to calculate income.

2. Information to Prove Income Must be Provided

You will likely need to provide income statements such as income tax returns (personal and corporate, if applicable), or other pertinent documents that will prove that the amount you claim to make is what you make. Required statements may include:

• Earnings slip –The most recent statement of earnings or pay slip.
• Financial statements –Your corporation’s financial statements if you control a corporation or are self-employed.
• Self-employment insurance –All information on the income you received from any type of employment insurance as an entrepreneur or self-employed person.
• Tax returns –The income tax returns for the past three tax years
• Re-assessment records –This will include any notices of assessment and or reassessment from the Canada Revenue Agency for the last three tax years.

Additionally, you may need… 

• Workers’ compensation information – Any information on the income you’ve received from workers’ compensation.
• Disability information – The information on the income you received from disability payments.
• Public assistance records –Information about any income you received from social or public assistance.
• Partnership information –All of the details of any business partnerships you’ve engaged in.
• Trust settlement records –You’ll need copies of any applicable trust settlement agreements, along with the trust’s three most recent financial statements.
• Pre-tax income records –Gather information about your corporation’s pre-tax income if you are a shareholder, officer or controller of a corporation.

3. Additional Information Might be Requested

Even if you provide all of these records and statements, you may be asked for additional information. If this is the case, it may be best to hire a professional to assist you. Circumstances, where additional information may be requested, include:

• Deliberate unemployment –If you are deliberately underemployed or unemployed unless to care for a child, because of health issues, or in pursuit of higher education.
• Non-taxable –If you don’t have to pay tax on income of any kind.
• Incorrect information –If you can’t or haven’t given accurate and up-to-date income information.
• International tax differences –If you happen to live in a country where the income taxes or tax rates are significantly lower than the ones in Canada’s.
• Other –There may be additional documentation required depending on the circumstances.

Is anything else required?

Key documents that are required for business valuation and guideline income determination also need to be identified and gathered. This should be done as soon as possible after initial separation because these documents may become increasingly difficult to gather as time goes on.

What if your personal finances are involved?

If any of your personal finances have become intertwined with business operations, the numbers used for calculating the amount of financial support needed for minors can end up higher than the total income on your personal tax return.

How Do Non-taxable Benefits Work?

It’s helpful to understand which benefits are non-taxable in Canada. Non-taxable benefits are either tax exempt or excluded from income taxes. The most common benefits that are non-taxable in Canada are:

• Automobile Allowance
• Director’s Allowance
• Professional and Union Dues
• Tuition and Training Costs
• Parking Costs
• Personal Use of Cell Phone
• Home Office Rent

What About Financial Disclosure?

The Alberta Child Support Guidelines require full financial disclosure to assure both full and fair disclosure of things like income, debts, assets, expenses, and other pertinent financial information. This information will help with the assessment of required child support amount.

How do I get help with this process?

These complicated proceedings may feel overwhelming. Luckily, there are professionals who are well versed in situations like these who can assist you with complex issues. A specialized professional such as a Chartered Professional Accountant (CPA) who is also a Chartered Business Valuator (CBV) can help business owners address these complex issues to know what their options are.

What is a Chartered Business Valuator?

This is a professional designation for business valuation specialists accredited by the Canadian Institute of Chartered Business Valuators. Certain CBV’s are specially trained to adhere to the Federal Child Support Guidelines.

What are the Federal Child Support Guidelines?

These are guidelines that explain how financial support of minor children will be designated. For more on this, visit the following Government of Canada website page with information on the Federal Child Support Guidelines.

Want to learn more about how Child Support is calculated?

The entire financial calculation process of payments after a divorce can be difficult to understand alone.

While much information is provided on Canadian government websites, understanding the whole process and how everything works can be difficult. Contacting a specialized professional such as a CPA who also is an experienced Chartered Business Valuator (CBV) may be the smartest and easiest path to take. This is especially true for small business professionals and entrepreneurs who are trying to calculate child financial support payments.