Child support when one party is suddenly self-employed

[rainman]

I received a call from a good friend last night who went through his divorce 5 years ago. He called me looking for some guidance and I told him I'd do a little research for him and let him know what I find out. I hope someone here can direct me and give me some guidance to relay to him.

He and his ex had a clean divorce in that they settled mutually everything including the sale of the home, and settled on child support for their two kids based on both their income. They have excellent 50/50 joint custody. Up until now there has been little issue and he has remarried and his ex is living with her boyfriend. The problem that has suddenly arisen is that this past year his ex quit her job and bought a variety store. I believe she and he new bf have gone into this venture together. She is working at the store and up until recently her bf still maintained an outside job. She is now seeking a variation because he income is lower now than when she was working at her old, regular job. One which she had throughout the marriage, divorce and up until this past year. Of course as is the case with most new businesses, one does not take an income usually for a few years.

She now claims that because her income is lower and because her bf quit his other job to work at their mutual business, the income from the business is shared between them, thus making her income lower.

My friend did receive an advancement and as of three months ago is now making about 5k more than before. He is aware that his income is pretty much carved in stone and is aware that as far as calculations are concerned, his annual income will be based on what his new salary reflects. This is really a non-issue. The big issue is the drastic decrease in her income as a result of her new business venture and even more so, the further decrease because she now claims that her income from the business will now be shared with her bf who has quit his job to work full time at their store along with her.

This seems a little difficult to determine to me. One must question why my friends should have to pay more CS in order to support her quest for self-employment when she was gainfully employed for many years. Her drastic decrease in income is self inflicted. Further to this, how can it be accurately determined what her income actually is when it is being shared with her boyfriend?

She has not threatened legal action but she may. What is my friends argument here? What should he request from her in order to satisfy an accurate reflection of her income? What do you suggest be his next move here. Seems very complex is nature to me. He would like to avoid the added cost of a lawyer but my opinion is that such financials that are associated with a business and self employment are probably complex in nature and would require a lawyer or the adjudication of a judge.

I would love to offer him some direction. This guy works so hard and I know he's under a lot of stress from this. Any guidance would be appreciated from this forum. Thanks.

[arabian]

There is plenty of case law on this on CanLII.

More often than not, particularly when it comes to child support, your friend would be successful at requesting an income be imputed to ex. The ex can do whatever she wants to do but will be required to pay according to that income.

Courts don't like to get involved with making decisions on whether or not a business is likely to succeed.

Having an income imputed can be as easy as getting the ex's past 3 yrs financials/tax returns. This way your friend doesn't have to butt his nose into her affairs and everyone can carry on doing what they want to do.

[Rioe]

The ex voluntarily dropping her income like that so she can venture into business should not be subsidized by an increase in the CS. Her income can be imputed to its previous levels. Entering into a business venture should not be done without keeping in mind existing financial obligations. Voluntarily dropping your income when you are responsible for children is not something to be done lightly.

When it comes to adjusting next year, use his slightly higher income, and her previous, normal, income. If she refuses to cooperate, last year's numbers will continue until she can take him to court to convince a judge to change it. And a judge is very likely going to feel much like you do. Your friend should argue that her decision to change jobs away from decently supporting her children should not be subsidized by him, and that her previous income, indexed, should be used for CS and section 7 calculations until such time as her new income may exceed it.