SPOUSAL SUPPORT ADVISORY GUIDELINES:
REPORT ON REVISIONS

III. Important Revisions to the Advisory Guidelines, Other Than Exceptions (continued)

5. Adjusting the Limits of the Range for Amount in Shared Custody Cases

At the time the Draft Proposal was released, the Supreme Court of Canada had not yet handed down its decision in Contino v. Leonelli-Contino, [2005] 3 S.C.R. 217, a decision that set out the proper approach to the determination of child support in shared custody cases under section 9 of the Federal Child Support Guidelines. Much of what was found in the shared custody version of the with child support formula anticipated the Court's reasoning in Contino and thus little revision was necessary.

In the final version, we have made three adjustments to the formula for spousal support in shared custody cases, none major.

First, since the release of the Draft Proposal, the Canada Revenue Agency decided that parents in shared custody cases will have their Child Tax Benefit, the child portion of the GST/HST Credit and the Universal Child Care Benefit rotated between them on a six-month on, six-month off basis, subject to some exceptions where parents agree otherwise. As these benefits are income under the formula, it is therefore critical to the calculation of spousal support in shared custody cases to ascertain which parent is receiving what benefits.

Second, as is explained in the final version, Contino emphasized that the straight set-off of table amounts was just the starting point for child support, with a wide discretion to go below or above the set-off amount. In determining spousal support in these non-set-off cases, it may be appropriate in some cases to make adjustments in calculating the formula range and, eventually, in choosing the appropriate amount within the ranges.

Third, the most important of these minor adjustments in shared custody cases is the one identified in the heading: an adjustment of the limits of the range for amount, to ensure that the 50/50 split of the spouses' net disposable income or monthly cash flow is always included in the formula range.

We consistently heard from lawyers and mediators that many shared custody parents wanted to opt for a 50/50 split of the couple's total net income by a combination of child and spousal support, so that the children experience roughly the same resources and standard of living in each household. In Contino, the Supreme Court identified the child's standard of living in each household as a central concern in the determination of child support in such cases. We agree that this equal split of net income should be available as one of the normal range of outcomes — not mandated, just available — in every shared custody cases.

In the vast majority of shared custody cases, the formula for spousal support will include this 50/50 overall split within the range, but there are some cases where the 50/50 split falls just outside the upper or lower end of the range. In these cases, we have revised the range, to extend the range to include the 50/50 split.

In what cases has the formula range been extended? In cases where parental incomes are lower or not that far apart, the upper end of the range has been adjusted upwards a bit. In cases where the recipient parent has little or no income and there are two or more children subject to shared custody, then the lower end of the range has been adjusted downwards. These adjustments are made automatically by the software programs.

6. Step-children under the With Child Support Formula

In the Draft Proposal, we did not address spousal support in cases involving step-children, i.e. children of the marriage who are not the biological or adoptive child of both spouses. In most cases, if a spouse is found to stand in the place of a parent towards a child for child support purposes, then the with child support formula for spousal support is appropriate, as a fairly high threshold test is applied . But some courts have lowered the threshold for finding step-parent status after the 1999 Supreme Court decision in Chartier.[2] Further, in British Columbia , the Family Relations Act imposes a step-parent child support obligation if "the step-parent contributed to the support and maintenance of the child for at least one year".[3]

These shorter-marriage step-parent cases were raised during the feedback sessions, especially in British Columbia, as we were asked which formula would be appropriate in these cases or whether there should be an exception under the with child support formula. There were concerns that this formula generate spousal support obligations that were too substantial in such cases, either too much or too long.

In the vast majority of step-parent cases, the with child support formula will apply with no difficulty. In our view, the short marriage concerns are now resolved by the addition of a durational range for spousal support under this formula. The difficulty in these short marriage cases was not the range for amount, but the potentially long duration under the age-of-children test for maximum duration and its use as a "default rule". The addition of a lower end will now provide a range for negotiations in these step-parent cases and, in the event that a case does go to court, there is now a meaningful range for duration under the with child support formula to adjust for such cases.

Under section 5 of the Child Support Guidelines, it is possible for a step-parent to pay less than the table amount of child support, if appropriate. Where the amount of child support is reduced under s. 5, the with child support formula range should be calculated using the full table amount rather than the reduced amount.[4]

7. A Hybrid Formula for Adult Children and Section 3(2)(b)

After the Draft Proposal was released, thanks again to feedback from individual lawyers, we discovered that the basic with child support formula did not provide reasonable outcomes in cases where child support is determined for adult children under section 3(2)(b) of the Child Support Guidelines. We added another hybrid formula, based upon the framework of the without child support formula, but adjusted for the child support amounts paid for the adult children.

Under s. 3(2)(b), the table-amount-plus-section-7-expenses approach is considered "inappropriate", usually because the adult child attends a post-secondary institution away from home or the child makes a sizeable contribution to his or her own education expenses or there are other non-parental resources to defray education expenses. In these cases, child support is calculated by preparing an individual budget for the adult child and, after the child and other contributions are deducted, the remaining deficit is then apportioned between the parents, based upon their incomes or some other arrangement. These child support amounts will differ significantly from any amounts using the table method, almost invariably lower.

This adult children formula will only apply where the child support for all the remaining children of the marriage is determined under section 3(2)(b) of the Child Support Guidelines. Once the parent's contribution to the child's budget has been allocated, these actual child support amounts are grossed up and deducted from each spouse's gross income. Then the without child support formula is applied, using the adjusted gross income difference and the length of marriage factor to determine amount and duration. Another practical advantage of this formula is that it eases the cross-over to the unadjusted without child support formula once the last child ceases to be a "child of the marriage".

IV. Exceptions

In the Draft Proposal, we set out exceptions, or categories of departures, from the formula ranges for amount and duration. Exceptions are the last step in a Guidelines analysis, after adjustment within the ranges or restructuring. Only if neither of these steps can accommodate the facts of a specific case should it become necessary to resort to these exceptions.

If there was any surprise in the first three years of the Advisory Guidelines, it was the failure by lawyers, mediators and judges to consider or apply the exceptions. In the final version, we assembled all the exceptions in one chapter. For those exceptions already identified, we have provided more refinements and specifics about their potential use. We have also added some new exceptions, reflecting the feedback received since the Draft Proposal. As stated earlier, we have generally not changed the structure of the formulas, as we prefer to create carefully-tailored new exceptions to address problems in specific sub-sets of cases.

1. The Six Exceptions in the Draft Proposal

We have retained the five exceptions listed in the Draft Proposal:

  1. compelling financial circumstances in the interim period;
  2. debt payment;
  3. prior support obligations;
  4. illness and disability;
  5. the compensatory exception in shorter marriages without children.

There was also a sixth exception in the Draft Proposal, identified under the custodial payor formula, for a non-primary parent to fulfil his or her parenting role.

We have refined the debt payment exception:

  1. the total family debts must exceed the total family assets, or the payor's debts must exceed his or her assets;
  2. the qualifying debts must be "family debts";
  3. the debt payments must be "excessive or unusually high".

We have also extended the prior support obligations exception to include those less common situations where the payor spouse has a child in his or her care, which does not involve a payment of support. A notional table amount should be deducted in this case, plus any section 7 expenses paid.

We have clarified the illness and disability exception, and the alternatives available under this exception. While in principle we favour a "no exception" approach, a slight majority of the reported cases do see these cases as exceptions, usually opting for a "lower amount, extended duration" approach. The law here remains in a state of flux.

2. Property Division: Reapportionment (B.C.), High Property Awards, Boston

Spousal support is only determined after the division of family or matrimonial property. In Canada , there is a different regime for property division (including pensions) in every province and territory. The remedies of property division and spousal support perform distinct functions and have different rationales. In the Draft Proposal, we therefore did not propose a general exception for unequal property division. We were less categorical about any exception for high property awards.

British Columbia 's property statute is unique in Canada , in allowing reapportionment of property (unequal division) on spousal support grounds, i.e. to recognize and adjust for economic disadvantage and lack of self-sufficiency at the end of a marriage. Where a sufficiently large reapportionment order has been made, an exception is recognized in B.C., allowing the amount of spousal support to be reduced below the ranges for amount and duration. The B.C. Court of Appeal has recognized this exception, as part of its Advisory Guidelines case law. We have added it as a new exception in the final version.

We did not recognize high property awards as an explicit exception in the Draft Proposal. The Advisory Guidelines can already accommodate many of the "high property" concerns: by imputing income, by choosing an amount and duration within the ranges, by individualizing support determinations for payors who also have incomes above the ceiling, and, in extreme cases, by finding no entitlement. While a general exception is still not provided, we also recognize that the law in these high-property, high-income cases remains disputed and we have left it open to lawyers to argue for exceptional treatment in such cases.

3. Basic Needs/Hardship: Without Child Support, Custodial Payor Formulas

The without child support formula works well across a wide range of cases from short to long marriages with varying incomes. In some parts of the country and in some cases, there is a specific problem for shorter marriages where the recipient has little or no income. In these cases, the formula is seen as generating too little support for the low income recipient to meet her or his basic needs for a transitional period that goes beyond any interim exception. This problem also arises in shorter marriages under the custodial payor formula.

Restructuring can resolve some of these short marriage cases. Some will qualify for the compensatory exception in shorter marriages. In some cases, the interim exception for compelling financial circumstances will be sufficient. But if none of these suffice, we have added another exception, the basic needs/hardship exception, to provide sufficient income to a recipient with little or no income in shorter marriages, i.e. of 1 to 10 years in length. One area where this exception can be applied is immigration sponsorship cases.

The exception is only intended to ease the transition from the marital standard of living and it is only intended to provide for basic needs and avoid hardship during that period. It is not intended to provide the marital standard of living nor is it intended to provide long-term support. The amount required to meet "basic needs" will vary from big city to small city to town to rural area. Those who pressed for this exception in the feedback process were mostly found in big cities and this exception may prove to be most useful in those cities.

4. Non-Taxable Payor Income

Both formulas produce a "gross" amount of spousal support, i.e. an amount that is deductible from taxable income for the payor and included in taxable income for the recipient. But some payors have incomes based entirely on legitimately non-taxable sources, usually workers' compensation or disability payments or income earned by an aboriginal person on reserve. In these cases, the payor is unable to deduct the support paid, contrary to the assumption built into the formulas for amount.

The non-deductibility may create ability to pay problems for the payor spouse, and in these cases an exception has to be made. Despite this non-deductibility for the payor, the recipient spouse will usually have to include the spousal support as income and will pay tax on the support income. Under this exception, it is thus necessary to balance the tax positions and the interests of the spouses — the payor who can't deduct and the recipient who still only receives after-tax support.

Under each formula, there are already self-adjusting mechanisms to limit the need for the exception. Under the without child support formula, which would "gross up" the non-taxable income of the payor, ability to pay will usually only become an issue in longer marriage cases, marriages of 15 years of more. In these longer marriage cases, with non-deductibility, the upper end of the range will hit the net income "cap" earlier, i.e. the point at which the net incomes of the spouses are equalized. It may, however, be necessary under this exception to go below the low end of the range in some cases.

The with child support formula already uses net incomes for its calculations and thus the formula automatically adjusts for non-deductibility. The result is that the whole range is reduced downward, and it is important to be aware of the reduction and the amounts involved. It may be necessary to use this exception to go above the upper end of this automatically-adjusted range.

5. Special Needs of Child

There was near-universal agreement during our feedback sessions that there should be an exception under the with child support formula for cases of children with special needs, available to increase both the duration and amount of spousal support in some cases. The duration of spousal support may have to be extended beyond the length of the marriage or beyond the last child finishing high school, as a child with special needs can dramatically affect the primary parent's ability to obtain employment, whether part-time or full-time. The formula for amount will increase spousal support where the primary parent has a lower income, but it may even be necessary to go beyond the upper end of the range, to supplement the children's household standard of living in appropriate cases.

6. Section 15.3: Small Amounts, Inadequate Compensation under the With Child Support Formula

The with child support formula gives priority to child support, as required by section 15.3(1) of the Divorce Act and by similar provisions found in provincial statutes. In cases where the spouses have three or more children or where there are large section 7 expenses, there may be little or no room left for spousal support, despite the substantial economic disadvantage to the custodial or primary parent. Or the maximum time limits may end spousal support, despite the potential inadequacy of the compensation in such cases. To be consistent with section 15.3(2) and (3) of the Divorce Act, there must be an exception for duration, to recognize that spousal support may have to continue beyond the maximum time limits under the with child support formula. And, further, in some of these cases, the amount of spousal support may even have to increase upon variation or review as the children cease to be "children of the marriage", but any of these increases in amount should remain within the formula ranges.

V. Conclusion: Going Forward

In the three years since the release of the Draft Proposal, the Advisory Guidelines have been widely used by spouses, lawyers, mediators and judges to assist in the resolution of spousal support cases across Canada . The Advisory Guidelines have already served to refocus and revitalize discussions about the law and practice of spousal support in Canada . Over that three-year period, revisions and adjustments have been made to the Advisory Guidelines in response to comments, criticisms and suggestions. The final version of the Spousal Support Advisory Guidelines brings to an end the most intensive part of the process. The obvious question that follows is "what happens next?"

In the months to come, we will be releasing an "operating manual", a short-form user guide to the Advisory Guidelines, as part of the educational materials about the final version, in the hope that this will promote a more sophisticated understanding of the Guidelines.

From this point forward, the Department of Justice will continue to monitor developments in the law of spousal support, including developments that might affect the Advisory Guidelines. As these informal Guidelines are used more and more, we expect there will be continuing suggestions for changes and improvements in future from those who are actively engaged in the field of family law. If there is a major appellate decision, that may spark a need for review too. The software suppliers will make regular adjustments to their programs for changes in tax rates and structures or changes in government benefits. As informal guidelines intended to reflect current practice, the Advisory Guidelines will continue to evolve and develop.