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Sarah MillerLawyer

    A “Guideline Income” is the income someone has for the purpose of calculating child support (under the Child Support Guidelines) or spousal support (under the Spousal Support Advisory Guidelines).

    It can be challenging to calculate a fair “Guidelines Income” for someone who is self-employed. This is because self-employed individuals are entitled to deduct legitimate business expenses from their incomes. However, for the purpose of calculating his or her support obligations, some legitimate deductions may be added back to the person’s income if he or she received a personal benefit from the business expense.

    If either party owns a corporation, a Guideline Income Report may be required to accurately determine the amount of income available to that person, because owners of corporations often pay themselves less than they could in an effort to minimize their income taxes. Guideline Income Reports tend to range from $3,000 to $15,000, but they can be a necessary resource if the parties are unable to reach an agreement about a party’s income.

    Guideline Income Reports are typically prepared by accountants who hold the designation of Chartered Business Valuator (“CBV”), and who are familiar with the Federal Child Support Guidelines and Spousal Support Advisory Guidelines. CBVs must adhere to the Canadian Institute of Chartered Business Valuators’ Standard No. 310 “Expert Reports” which requires CBVs to list the scope of review, explain the rationale of the approach taken, and list the assumptions used and the procedures followed to determine the reasonableness and appropriateness of key assumptions. This can result in a higher quality report that is more likely to withstand judicial scrutiny.

    CBVs are also used to addressing issues such as fair market compensation and the reasonableness of expenses, as these adjustments are often made in valuation reports. Some CBVs have received additional training in litigation support and basic principles in dispute resolution. In addition to a CBV designation, it can also be helpful if the accountant also holds a Chartered Professional Accountant (“CPA”) designation, as not all CBVs are accountants. Accountants are usually familiar with the Income Tax Act rules governing the deduction of expenses. While those rules are not determinative with respect to the calculation of a person’s guideline income, they can serve as an important starting point in order to spot irregular expenses.

    Lastly, it is common for the income of self-employed individuals to fluctuate. If a party’s income fluctuates, it may be appropriate to average that person’s income over the last three years.