Introduction
Calculating child support can feel like trying to hit a moving target—especially when one parent is self-employed. Unlike salaried employees, self-employed people often have unpredictable incomes, fluctuating business expenses, and unconventional pay structures. So, how do Ontario courts figure out what’s fair for kids when the numbers aren’t so clear-cut? If you’re lost in the weeds of deductions, tax returns, and business write-offs, you’re not alone.
At Tailor Law, we know the stakes are high. Every dollar counts when it comes to your child’s wellbeing, and the last thing you need is confusion or conflict about money. That’s why we’ve put together this detailed, plain-language guide to calculating child support for the self-employed in Ontario. Whether you’re a parent, business owner, or just trying to keep things fair, you’ll find the answers you need right here.
How Is Child Support Calculated in Ontario?
Let’s start with the basics. In Ontario, child support is determined using the Federal Child Support Guidelines. These guidelines set out a table amount based on:
- The payor parent’s gross annual income
- The number of children requiring support
- The province or territory where the payor lives
For most salaried employees, figuring out “gross income” just means looking at Line 15000 (formerly Line 150) of their tax return. But for self-employed parents, that number can be all over the map. That’s where things get tricky.
Why Is Calculating Child Support for the Self-Employed So Complicated?
When someone’s self-employed, their tax return often doesn’t tell the whole story. Self-employed people can:
- Deduct business expenses (some legitimate, some… not so much)
- Write off portions of their home, vehicle, or other costs
- Pay themselves in creative ways (dividends, management fees, etc.)
- Defer income or bonuses
- Mix personal and business finances
All these moving parts can muddy the waters. The goal is simple: ensure children aren’t shortchanged because income is hidden, disguised, or inconsistent. But getting there? That’s where an experienced Ontario family lawyer comes in.
What Counts as Income for the Self-Employed?
The Guidelines take a broad view of “income.” For self-employed parents, it’s not just what’s left after business deductions. Courts look at:
- Net business income (after reasonable expenses)
- Salaries, wages, and bonuses (from the business)
- Dividends received from private corporations
- Retained earnings or “perks” (e.g., personal use of a company car, travel, meals)
- Non-arm’s length transactions (deals with family or related companies at below-market rates)
- Any other income, benefits, or advantages
Bottom line: If you’re benefiting from a business, the court wants to know about it.
How Do Ontario Courts Determine Income for Child Support?
Ontario courts follow a three-step approach for calculating child support for the self-employed:
- Start with Line 15000 from the payor’s tax return.
- Adjust for business deductions and add-backs (Guideline Sections 16-20). The court may add back certain expenses or impute income if actual income doesn’t reflect true ability to pay.
- Consider pattern of income by averaging several years if income fluctuates.
Factors the Court Considers
- Are the business expenses “reasonable and necessary”?
- Is income being unreasonably reduced?
- Are there personal benefits disguised as business expenses?
- Has the parent manipulated income to avoid higher support?
Pro tip: Courts will lift the hood on your finances. Transparency is key.
Common Self-Employment Income Sources Considered
When calculating child support for the self-employed, Ontario courts look beyond the basics. Here’s what they’ll examine:
- Sole Proprietorship Income: Net profit after legitimate business expenses.
- Partnership Income: Share of partnership profits, plus benefits.
- Corporate Dividends: Money paid out from a private company.
- Management Fees: Are they reasonable, or just a way to move money?
- Shareholder Loans: Are you “repaying” yourself instead of taking salary?
- Retained Earnings: Is income being left in the company to avoid tax?
- Personal Perks: Company pays for car, vacations, meals, etc.
Remember: The court may “impute” income if it thinks the reported number is artificially low.
Which Business Deductions Will the Court Allow?
Self-employed parents often deduct a laundry list of business expenses on their taxes. But just because the CRA allowed it doesn’t mean a judge will. The court’s focus? What’s fair for the kids.
Deductions That May Be Questioned or Added Back
- Meals and entertainment (especially if excessive)
- Vehicle costs (if used personally)
- Travel (family vacations written off as “business”)
- Home office expenses (if the space is used for personal reasons)
- Salary or management fees to family members
- “Professional development” that’s really a personal hobby
If the expense primarily benefits the parent (not the business), the court may add it back to income for child support purposes.
What If Income Is Hidden or Under-Reported?
Ah, the old shell game. Some self-employed parents try to minimize child support by:
- Under-reporting cash income
- Inflating business expenses
- Shifting income to a new partner or relative
- Keeping money in the business (retained earnings)
- Paying themselves in dividends or “loans”
Ontario courts have seen every trick in the book. If there’s evidence of income manipulation, the court can impute income—that is, assign a higher income than what’s reported on paper.
How Courts Impute Income
Under Section 19 of the Guidelines, a judge can set a higher income if the parent:
- Is intentionally under-employed or unemployed
- Diverts income to others
- Fails to provide full financial disclosure
- Lives a lifestyle inconsistent with reported income
No hiding behind creative accounting here.
How Does Fluctuating Income Affect Support Calculations?
Running your own business means every year looks different. One year you’re flush, the next you’re scraping by. So, how does the court deal with rollercoaster income?
Averaging Income
Often, Ontario courts will average your income over the past 3 years to smooth out the highs and lows. This helps prevent windfalls or shortfalls from skewing child support payments.
- Example: If your net income was $60,000, $90,000, and $30,000 over the last three years, the average is $60,000.
Note: If your income has dropped for reasons beyond your control (like an industry downturn), the court may consider recent numbers more heavily.
How to Prove Income: Documents and Disclosure
Transparency is the name of the game. Whether you’re the payor or recipient, you’ll need to provide or request full financial disclosure.
Key Documents Required
- Personal tax returns (last 3 years)
- Notices of Assessment (last 3 years)
- Financial statements for the business (audited, if available)
- General Ledgers and bank statements
- List of all business and personal assets
- Details of any shareholder loans or dividends
- Details of salaries paid to family members
- Records of “perks” (vehicles, travel, meals)
Failure to disclose fully can backfire—courts can draw negative inferences or impute income.
What Happens If the Self-Employed Parent Refuses to Disclose?
Stonewalling doesn’t pay in family law. If a self-employed parent drags their feet or refuses to provide financial information, the court can:
- Compel disclosure through court orders
- Impute income based on available evidence
- Penalize the non-compliant parent with costs or sanctions
And if the judge thinks income is being hidden, they may set support at a higher level to be safe. Not worth the gamble!
Special and Extraordinary Expenses: Who Pays What?
Child support isn’t just about the “table amount.” There are also special or extraordinary expenses (called “section 7 expenses”)—things like:
- Childcare fees
- Medical/dental not covered by insurance
- Extracurricular activities (sports, music, etc.)
- Post-secondary education
These are usually split in proportion to each parent’s income. For self-employed parents, your “share” is based on the court’s calculation of your true income—not just what’s on your tax return.
Tips for Self-Employed Parents Navigating Support Obligations
Whether you’re the payor or recipient, here’s how to stay ahead of the curve:
For Self-Employed Payors
- Keep clear records: Separate business and personal finances.
- Be transparent: Full disclosure builds trust and credibility.
- Plan for variability: If your income fluctuates, budget for both good and lean years.
- Consult a family lawyer: Get advice before negotiating or going to court. Tailor Law can help you put your best foot forward.
For Support Recipients
- Request full disclosure: Don’t settle for just a tax return.
- Look for red flags: Lavish lifestyle, new assets, or major purchases may signal hidden income.
- Gather evidence: Bank statements, business websites, or social media can provide clues.
- Work with a lawyer: Legal expertise is crucial when dealing with creative accounting.
Conclusion
Calculating child support for the self-employed in Ontario isn’t for the faint of heart. The numbers can get messy, but the principle is simple: children deserve fair, consistent support—no matter how creative the payor’s finances.
If you’re wrestling with deductions, disclosure, or doubts about what’s “really” fair, don’t go it alone. The experienced family lawyers at Tailor Law understand the ins and outs of self-employment, complex income, and Ontario’s child support rules. We’re here to help you cut through the noise, protect your interests, and—most importantly—put your children first.
Ready for a consultation? Reach out today and let’s get your questions answered for good. Your child’s wellbeing is too important to leave to chance.
Explore more on family and divorce law, or book your free consultation with Tailor Law PC—Ontario’s trusted choice for navigating complex child support matters.
