Complete financial disclosure is the foundation for resolving any family law case. In family law cases involving claims for support or property division, both married couples and common-law partners are required to participate in complete and transparent financial disclosure. The court requires you to fill out a financial statement. 

Financial disclosure includes Form 13 or Form 13.1 as well as other documents showing your income, property, savings, and debts.

Why it is important that financial disclosure be complete and accurate?

Complete and accurate financial disclosure is vital in family law for ensuring fair resolutions, legal compliance, and preventing delays and additional costs.

Rule 13 of the Family Law Rules requires parties involved in support, property, or matrimonial home claims to file a financial statement using Form 13 or 13.1, ensuring informed decisions and valid agreements.

Section 21 of the Child Support Guidelines describes the financial documents that are to be served and filed if there are claims for child support, spousal support or property.

Inaccurate disclosure can lead to financial penalties, credibility damage, and courts might adjust or impute income or asset values, influencing support and property division. Incomplete disclosure risks invalidating agreements or court orders, potentially requiring renegotiation.

When is it not necessary to make financial disclosure?

In some cases, you do not have to make financial statements, such as:

• Child Support Table Amount Cases: If your case involves only child support and not spousal support or property division, and you are seeking the standard table amount as per the Child Support Guidelines, then filing a Financial Statement might not be necessary.
• Consent Motions to Change Support: In situations where both parties are filing a Motion to Change either child or spousal support, and they mutually agree that Financial Statements are not necessary, then these documents may not need to be filed. This typically occurs when both parties have already reached an agreement on the new terms of support and are jointly requesting the court to formalize this agreement.
• Family Arbitration Claims: If your legal matter is solely related to family arbitration and does not involve court proceedings, the requirement for filing a Financial Statement may not apply.

What is included in a financial statement?

Financial statements include:

1. Income: This represents the total earnings from employment, business, investments, and other sources. It includes salaries, wages, bonuses, and any other income received.
2. Expenses: These are the costs incurred for daily living and other obligations. Expenses can include housing costs, utilities, food, transportation, childcare, and other regular payments.
3. Assets: Assets are properties or items of value owned. This can include real estate, vehicles, investments, savings, and personal items like jewelry and art. Assets should be listed as accurately as possible with their current resale or appraised value.
4. Debts: Debts represent money owed to others. This includes mortgages, car loans, credit card balances, and amounts owed to CRA.

How is income determined for an employee?

For employees, income determination typically starts with the line 15000 (formerly known as Line 150) income on their tax returns. However, this is often just the first step. In cases of fluctuating incomes, such as with self-employed individuals, the court under Section 17 of the Ontario Child Support Guidelines might average out the last three years’ income. For complex cases, an expert might be needed for an income valuation.

How is income determined for self-employed?

For self-employed individuals, determining income for support purposes involves examining their business financial statements and distinguishing between ‘soft’ and ‘hard’ expenses. Soft expenses, like cell phones, entertainment, and home office costs, may be added back into income if deemed personal rather than necessary for business. For example, suppose a self-employed individual reports $5,000 annually for car expenses, claiming it as a business cost. However, if it’s determined that 60% of the car’s usage is for personal needs, then $3,000 (60% of $5,000) might be considered a personal expense and added back to their income for the purpose of calculating support payments. Additionally, this figure may be adjusted (imputed) to reflect the pre-tax earnings needed to net the same amount, considering their tax bracket.

What does it mean to impute income?

To impute income in family law means a court assigns an income level to a person different from their actual earnings. Section 19(1) of the Federal Child Support Guidelines and section 19 of the Ontario Child Support Guidelines allows income to be imputed for the purpose of child support. This section provides a list of circumstances where imputation of income may be appropriate.The list is not exhaustive meaning a judge is not limited to these factors. 

Below are some examples of circumstances where income can be imputed.

Section 19(1)(a) states that income may be imputed where:

(a) 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.

(b) the spouse is exempt from paying federal or provincial income tax

(e) the spouse’s property is not reasonably utilized to generate income.

(f) failure to provide required income information when under legal obligation

(g) spouse unreasonably deducts expenses from income

(h) spouse derives significant portion of income from dividends, capital gains or other sources taxed at lower rate

Some factors that the court may consider when determining whether it is reasonable to impute income in the circumstances and how much is considered reasonable in situations are the age, education, experience, skills and health of the parent.

What are some of the key principles of income imputation?

• Income imputation is entirely an exercise of judicial discretion.
• Party seeking income imputation bears onus to establish basis for imputation
• Evidence must establish an amount for imputed income, not just that it is needed.
• Finding of imputation of income is made on balance of probabilities

To impute income, is it necessary to show bad faith?

In C.V. v. S.G., the court clarified that the party seeking to impute income does not need to prove bad faith on the part of the underemployed party.