Federal Child Support Guidelines provide a simple framework for determining the amount of child support to be paid. These guidelines simply takes the income of the parent paying child support and the number of children to determine the monthly amount. While this seems like a simple exercise, determining income can be complex. RRSP withdrawals can be considered income when calculating child support.
Yesterday I wrote about a recent decision from the Ontario Court of Appeal, where sole custody was awarded to the father. This post looks at the same decision, but on the issue of RRSP withdrawals and how they impact income for child support purposes.
Are RRSP Withdrawals Considered Income When Calculating Child Support in Ontario?
The couple in this case married in 2006 and separated in 2015. They had one child together, who was born in 2014. The 12-day trial for this high-conflict divorce was in 2018. The trial covered all aspects of the divorce, including custody, access, child support, spousal support and property division.
The father was awarded sole custody and the child was to live with each parent 50% of the time. To calculate child support owing, the guidelines were used by each parent and only the difference would be owing each month.
The father was found to have an income of $128,000 and the child support for one child at this income is $1,130 per month. The mother had employment income of $81,000 and the child support for one child at this income is $755 per month. This means that absent any other information, though the child split time equally between each residence, the father would pay the mother $375 per month.
However, the mother had an RRSP withdrawal of $59,000 per year, which increased her annual income for tax purposes to $140,000. This RRSP withdrawal was used to pay for her lawyer in the divorce. Child support for one child at $140,000 per year increases to $1,225. If the RRSP was considered income, it would mean instead of receiving $375 per month, the mother would have to pay the father $95 per month.
RRSP’s Can be Considered Income When Calculating Child Support in Ontario
To resolve this issue, the Judge reviewed the law on calculation of income. This included a review of a 2013 Ontario Court of Appeal decision on the issue. In that case, the father had made an RRSP withdrawal to assist with the purchase of a residence. The RRSP withdrawals in those circumstances were found to be income, as it was reported as income on his tax return.
The mother in the current case had made the $59,000 RRSP withdrawal to pay her lawyer. She argued this was a one-time, non-recurring payment, which did not increase her ability to pay support. The Judge didn’t agree. Effectively, the money was available to pay for lawyers, therefore it was also available to pay for child support.
The mother appealed this decision and the Ontario Court of Appeal made a ruling last month. The appeal was dismissed and the Court of Appeal found that the Judge did not make any error in including this amount in the mother’s income. The Appeal Court found that the Judge was alive to the potential issue of unfairness and the decision was reasonable.
Reasonable Actions Are Necessary During Divorce Proceedings
One other comment about this case needs to be made. The mother had argued in 2015 that the father’s RRSP withdrawal should be included in his income to determine child support. It was very harmful to the mother’s argument that three years prior she had argued for inclusion in the father’s income. Then, because it impacted her, she was argued that it shouldn’t be included in her income.
During prolonged divorce proceedings, it can be difficult to remember everything that has been done. Unreasonable actions can lead to your own arguments being used against you.
Prior to Making RRSP Withdrawals, Talk to a Lawyer
If you are in the midst of divorce proceedings consider your finances. All financial decisions you make can impact support payments and other property matters. Prior to making any significant financial decision, obtain some legal advice.
Contact Hearty Law with any questions on financial matters related to your divorce. Hearty Law will assist you with advice on child support, spousal support, hidden assets, concealed income, division of property and any other family law financial matter.
Hearty Law serves Toronto, Ottawa and surrounding communities.