In some circumstances, we might set a person's guideline income at a higher amount, which is referred to as imputing income. This is usually to adjust for tax rates, where they're self-employed and benefit from business deductions, or where they're avoiding child support such as by working for cash that they're not reporting.

Circumstances where courts impute income may include where:

1. the spouse is intentionally under-employed or unemployed, other than where the under-employment or unemployment is required by the needs of a child of the marriage or any child under the age of majority or by the reasonable educational or health needs of the spouse;
2. the spouse is exempt from paying federal or provincial income tax;
3. the spouse lives in a country that has effective rates of income tax that are significantly lower than those in Canada;
4. it appears that income has been diverted which would affect the level of child support to be determined under these Guidelines;
5. the spouse’s property is not reasonably utilized to generate income;
6. the spouse has failed to provide income information when under a legal obligation to do so;
7. the spouse unreasonably deducts expenses from income;
8. the spouse derives a significant portion of income from dividends, capital gains or other sources that are taxed at a lower rate than employment or business income or that are exempt from tax; and
9. the spouse is a beneficiary under a trust and is or will be in receipt of income or other benefits from the trust.

Imputing isn't about attributing blame. It's about scenarios where someone's income doesn't reflect their true ability to contribute to the support of their children (Hunt v Smolis-Hunt, 2001 ABCA 229 at para 47).

The parent alleging that the other parent's income should be imputed is who has to prove that imputation is appropriate (Craig v Craig, 2019 ABQB 375 at para 9). Even where income is challenged due to under-employment or unemployment, this is meant to be a low bar, such as showing a decrease in income. In that case, the onus shifts to the person whose income is being challenged to show why their stated income is reasonable (Peters v Atchooay, 2022 ABCA 347). After income has been imputed, the onus shifts to the party seeking to vary/change that imputed income (Peters v Atchooay, 2022 ABCA 347).

There are many adjustments which we apply to Self-employment Income, in addition to sometimes imputing income.

Sometimes we impute income to a person seeking spousal support where they've behaved in a manner showing evasion of their capacity to be wholly or partially self-sufficient during the time that spousal support was ordered (Shigehiro v Shigehiro, 2017 ABCA 392 at paras 55, 59).

• Capital Gains, Losses, and Dividends
• Diverted Income
• Failing to provide income information when under a legal obligation to do so
• Property not reasonably utilized to generate income
• Tax-exempt income
• Unemployment or Under-employment
• Unreasonably Deducting Expenses

Usually only half of a capital gain or capital loss will appear in a person's Income Tax Return. That amount can be increased to the full amount of the gain/loss (sections 6 and 11 of Schedule III to the Federal Child Support Guidelines).

However, if the gain/loss is non-recurring, it should only be included at all if it is fair to do so, in light of the sale and the fluctuation in income (Guidelines, s 17(2); Ewing v Ewing, 2009 ABCA 227 at paras 33, 35). For example if the funds are re-invested or expected to be re-invested, then that may not decrease their income (Ewing v Ewing, 2009 ABCA 227 at para 64). Courts may consider (Ewing v Ewing, 2009 ABCA 227 at para 35):

1. Is the non-recurring gain or fluctuation actually in the nature of a bonus or other incentive payment akin to income for work done for that year?


2. Is the non-recurring gain a sale of assets that formed the basis of the payor's income?


3. Will the capital generated from a sale provide a source of income for the future?


4. Are the non-recurring gains received at an age when they constitute the payor's retirement fund, or partial retirement fund, such that it may not be fair to consider the whole amount, or any of it, as income for child support purposes?


5. Is the payor in the business of buying and selling capital assets year after year such that those amounts, while the sale of capital, are in actuality more in the nature of income?


6. Is inclusion of the amount necessary to provide proper child support in all the circumstances?


7. Is the increase in income due to the sale of assets which have already been divided between the spouses, so that including them as income might be akin to redistributing what has already been shared?


8. Did the non-recurring gain even generate cash, or was it merely the result of a restructuring of capital for tax or other legitimate business reasons?


9. Does the inclusion of the amount result in wealth distribution as opposed to proper support for the children?

Where a person earns dividends, the Dividend Gross-up must also be deducted from their guideline income.

For example, if a person's business is to regularly buy and sell vehicles, the capital gains and capital losses will likely be included. On the other hand, if it's a one-time sale that isn't expected to reoccur and the sale proceeds are used to purchase a replacement asset, not relied on instead of full-time employment, then we may ignore that gain entirely.

An example where courts have imputed income which has been diverted is where income is paid to the spouse's new partner's corporation for work which appears to have been performed by the spouse (Potter v Graham, 2004 ABQB 1866).

See Exchanging Financial Documentation.

This ground of imputation also allows a court to estimate a person's income at an initial chambers appearance until their financial disclosure can be completed (Peters v Atchooay, 2022 ABCA 347).

This ground to impute income could arise for example where a person has a significant amount of cash in their bank account without a reasonable explanation for why it is not invested, or a vacant rental property for which they haven't taken reasonable steps to rent out.

In relation to businesses, the test for this ground is whether a "reasonably prudent" businessperson would use the property to generate income, keeping in mind the need for funds for legitimate business objectives (Mollot v Mollot, 2006 ABQB 249 at para 63).

Income earned on a reserve is generally not subject to income tax. In that case, it must be added to a person's guideline income. It must also be grossed-up for taxes (Peters v Atchooay, 2022 ABCA 347 at paras 102-104), so that the support they pay is roughly equivalent to those with similar net incomes who are required to pay income tax.

Income may be imputed where a parent is "intentionally under-employed or unemployed, other than where the under-employment or unemployment is required by the needs of a child of the marriage or any child under the age of majority or by the reasonable educational or health needs of the spouse".

Courts implement the following analysis (Peters v Atchooay, 2022 ABCA 347):

1. Is the parent in question intentionally under-employed or unemployed? Imputation of income is not available under s 19(1)(a) where the under-employment or unemployment arises through circumstances truly beyond the control of the payor, and thus involuntary. Examples include lay-offs, reduced hours, or termination without cause. (At some point, however, the continued under-employment or unemployment may become unreasonable for purposes of s 19(1)(a), making imputation of income available). Moreover, even ostensibly “voluntary” decisions to make less money than in the past will not always amount to “under-employment” where factors like age mean that present and future earning capacity is being met but is less than past earning capacity.


2. Do the listed exceptions to imputation in s 19(1)(a) apply? Is 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 reasonable educational or health needs of the spouse? These exemptions are not intended to be automatic or permanent, and their availability will depend on the circumstances of the case: Spring v Spring, 2022 ABCA 19 at para 18. The factors set out in Demers v Moar, 2004 ABCA 380 at para 21 provide a useful starting point for the consideration of the “needs of the child” exemption in the context of parental leaves and child-care requirements of young children.


3. Should judicial discretion to impute income be exercised? If the under-employment or unemployment arises from voluntary choice and the listed exceptions to imputation do not apply, the court may exercise its mandate to impute income under s 19(1)(a). However, because this is discretionary, the question of whether to impute income (and if so, how much) involves determining if the voluntary under-employment or unemployment was reasonable, having regard to all the circumstances.

Principles of imputation for under/un-employment include (Peters v Atchooay, 2022 ABCA 347 at para 92):

1. General Duty to Work. There is a duty to seek employment where a parent is healthy and can 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 necessary skills can be learned on the job. While this may mean a job at the lower end of the wage scale, parents cannot refuse to take reasonable steps to support their children simply because they cannot obtain interesting or highly paid employment. Nor can a high-earning or highly skilled parent refuse employment indefinitely by holding out for employment commensurate with their skills and previous level of earning, job title or seniority.


2. Earning Capacity Used to Assess Reasonableness. When determining whether to impute income on the basis of under-employment or unemployment, a court must consider what is reasonable in the circumstances. The starting point is the payor’s earning capacity, which is the objective measure by which the reasonableness of the parent’s decision or conduct is assessed. Earning capacity is determined based on factors like age, education, experience, skills, and health of the payor, along with availability of work, the freedom to relocate, and other obligations.


3. Discretion. Income will not be imputed where a parent’s decision to earn less than the maximum they are capable of making is found to be reasonable. Nor is there a presumption that a career choice resulting in a reduction in income is unreasonable.


4. Obligation to Support Children is the Overarching Goal. The reasons for under-employment or unemployment must be objectively scrutinized. A parent is required to act in a manner reflective of his or her obligations and cannot be excused from support obligations in furtherance of unrealistic, unproductive or non-remunerative career aspirations. Persistence in unremunerative employment or repeated education initiatives may also entitle the court to impute income. Parental self-fulfillment is a consideration but does not trump child support requirements.


5. Agreements Contextualize Reasonableness. The parties’ pre-separation agreements or social contracts have some weight in determining Guidelines income, but they are not determinative. The parenting arrangement, and the payor’s involvement or lack of involvement with the children, the length or time the arrangement has been in place, and the ages of the children may be considered in assessing the reasonableness of the payor’s under-employment or unemployment.


6. Reasonableness Is Not Fixed in Time. The payor’s history of paying child support and providing financial disclosure are objective measures by which to assess the reasonableness of the payor’s employment decision or conduct. What is reasonable (or unreasonable) is determined at one point in time and will not necessarily remain static for the entire time the children are owed support.


7. The Ultimate Onus Rests on the Party Opposing Imputation. Assuming the financial disclosure requirements have been met, the onus is on the party opposing imputation to prove on a balance of probabilities: 1) that the under-employment or unemployment was not voluntary, that is, not due to their own decision or conduct; or, 2) that the under-employment or unemployment is as a result of one of the listed exceptions in s 19(1)(a). If neither circumstance applies, that party must establish on a balance of probabilities that their under-employment or unemployment is reasonable, having regard to all the existing circumstances. However, where it is an initial application, the person seeking an imputation of income under s 19(1)(a) has a preliminary onus to establish some basis for the imputation sought. Either way, each stage of the analysis requires evidence that is as objective as possible. Bare assertions will not suffice.

Whether unemployment/under-employment is required by the needs of a child depends on circumstances such as (Spring v Spring, 2022 ABCA 19 at paras 17, 18):

1. the particular needs of the children;
2. the skills and ability of the payor parent;
3. the availability of alternate affordable childcare and in this particular circumstance; and
4. the existence of a pre-existing binding support obligation.

However, if a person was supporting children from a previous relationship, it may not be reasonable for them to be unemployed when they have new children, because of their obligation to the child from the previous relationship (Spring v Spring, 2022 ABCA 19 at para 18; Shukalkin v Shukalkin, 2012 ABCA 274).

If a person is claiming that they're unable to work due to a medical reason, medical evidence will generally be required for the entire duration of the time in question (Peters v Atchooay, 2022 ABCA 347 at para 67).

If a person is claiming that they're unable to find work, they must provide evidence of efforts to find alternate employment throughout the period in question (Peters v Atchooay, 2022 ABCA 347 at para 67).

The amount that a person's income is imputed to cannot be arbitrary, there must be a rational basis, grounded in evidence (Peters v Atchooay, 2022 ABCA 347 at para 93). Establishing employment capacity includes, at a minimum, evidence of the payor's age, technical skills, education, health, work history, and the realities of the labour market (Peters v Atchooay, 2022 ABCA 347 at para 67). Albertan wage information can be found at Alberta OCCinfo (https://alis.alberta.ca/occinfo/) or the Canada Job Bank (https://www.jobbank.gc.ca/home).

See Self-employment Income. The same analysis can also apply to expenses deducted by an employee, for example commission-based employees who have some discretion about expenses deducted, or people who are employed by friends/family.