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Guideline Income in Alberta

February 18, 2022

Alberta

,

Canada

Issue

Do tax-exempt student grants constitute income for the purpose of calculating support?

Conclusion

One Alberta case was found which dealt with the issue of whether student grants constitute guideline income, however this case did not specifiy whether the grants were tax-exempt. Guidance may also be gleaned from cases dealing with similar issues from other jurisdictions.

In Fibke v. Fibke, Alberta's Court of Queen's Bench included the Repondent's receipt of study grants and a disability grant as part of his guideline income for the purposes of calculating child and spousal support. In this case, the Court also imputed income the Respondent should be able to earn during the months he is not in school.

Courts have found non-taxable funds received by a payor to be Guidelines income in consideration of a number of factors:

• The funds received are generated by work done or through investments, or paid as compensation to which the payor is legally entitled when deprived of such work or investments. The funds are not simply a return of capital or a draw on capital.

• Receipt is not gratuitous. The recipient will have a right to receive the payments. Thus, amounts received as a gift will not usually be considered income.

• Payment is often recurrent.

• The funds are typically used to finance a significant proportion of the recipient’s living expenses. (Rivard v. Hankiewicz)

In Mwenda v. Madituka, Ontario's Court of Justice ruled that non-taxable student grants were to be included as part of guideline income for the purposes of calculating support. In this case, Murray J. applies the test found in Rivard v. Hankiewicz to the grants considered in the instant case.

In B.H.B. v. N.K.H., British Columbia's Provincial Court ruled that a party's student grants were to be included as part of her income for the purposes of determining child support. In this case, Hamilton J. reasoned that because the grants are available and non-repayable, they were included in guideline income.

Law

In Fibke v. Fibke, 1999 ABQB 134 (CanLII), Alberta's Court of Queen's Bench included the Respondent's receipt of study grants and a disability grant as part of his guideline income for the purposes of calculating child and spousal support. In this case, the Court also imputed income that the Respondent should have been able to earn during the months he was not in school:

[6] In his capacity as a student, Mr. Fibke receives Canada and Alberta student loans, a Canada study grant, an Alberta Opportunities bursary and a Disabled Opportunity Grant. These amounts total $11,195. Mr. Fibke’s school year extends from the beginning of September to the end of April. Mr. Fibke indicates that he does not have an ability to multitask (go to school all day and then work part-time) due to a mild impairment or dysfunction consistent with a brain injury. Mr. Fibke is not disabled from finding employment during those months when he is not in school.

[...]

[14] Mr. Fibke’s income while he is in school is a gross of $1,300 monthly. With his experience and training, it is reasonable to assume that he can earn that much during the four months when he is out of school. Therefore, Mr. Fibke’s annual gross income for Guideline purposes is $15,600. The application of the Guidelines results in a baseline monthly payment of $126. Sarah’s mother is not claiming any s. 7 extraordinary expenses.

[15] It is to be noted that, co-incidentally, Mr. Fibke indicates in his budget that he currently contributes $126 per month into some type of scholarship program. The current needs of his daughter Sarah can be met by re-direction to her of that amount.

In Rivard v. Hankiewicz, 2007 ONCJ 180 (CanLII), Ontario's Court of Justice set out the reasoning behind considering non-taxable funds received by a payor to be guideline income:

[40] The guidelines scheme is based on a prototypical payor who derives the funds for the support of his or her family from money that is taxable—wages, investment or rental income. It appears to me that section 19 of the guidelines was crafted to allow courts make determinations of child support payable by parents who do not fit this prototype — because, for example, they have not reported income to the court or to the C.C.R.A., or because they are intentionally underemployed, or because the source of funds upon which they rely for support for their family is exempt from tax or taxed at a lower rate than it would be in Canada. In my view, the more a stream of tax-exempt funds resembles taxable income, the more compelling is the argument that this stream should be found to be “income” under the guidelines for the purpose of determining child support.

[41] Courts have found non-taxable funds received by a payor to be Guidelines income in consideration of a number of factors:

• The funds received are generated by work done or through investments, or paid as compensation to which the payor is legally entitled when deprived of such work or investments. The funds are not simply a return of capital or a draw on capital.[11]

• Receipt is not gratuitous. The recipient will have a right to receive the payments. Thus, amounts received as a gift will not usually be considered income.[12]

• Payment is often recurrent.

• The funds are typically used to finance a significant proportion of the recipient’s living expenses.[13]

In Mwenda v. Madituka, 2018 ONCJ 503 (CanLII), Ontario's Court of Justice ruled that non-taxable student grants were to be included as part of guideline income for the purposes of calculating support. In this case, Murray J. applied the test found in Rivard v. Hankiewicz, 2007 ONCJ 180 (CanLII) to the grants considered in the instant case:

[66] What factors might indicate that non-taxable funds paid to a payor should be considered Guideline income? In Rivard v. Hankiewicz,[11] the court considered the issue of whether non-taxable annuity payments awarded because of personal injury should be considered Guideline income, and observed as follows.

The guidelines scheme is based on a prototypical payor who derives the funds for the support of his or her family from money that is taxable--wages, investment or rental income. It appears to me that section 19 of the guidelines was crafted to allow courts make determinations of child support payable by parents who do not fit this prototype -- because, for example, they have not reported income to the court or to the C.C.R.A., or because they are intentionally underemployed, or because the source of funds upon which they rely for support for their family is exempt from tax or taxed at a lower rate than it would be in Canada. In my view, the more a stream of tax-exempt funds resembles taxable income, the more compelling is the argument that this stream should be found to be "income" under the guidelines for the purpose of determining child support.

Courts have found non-taxable funds received by a payor to be Guidelines income in consideration of a number of factors:

The funds received are generated by work done or through investments, or paid as compensation to which the payor is legally entitled when deprived of such work or investments. The funds are not simply a return of capital or a draw on capital. (Dalton v. Craig, 2002 CanLII 78079 (ON SCDC), 2002 CarswellOnt 42, Ont. C.A.)

Receipt is not gratuitous. The recipient will have a right to receive the payments. Thus, amounts received as a gift will not usually be considered income.(Ell v. Ell, (2002) 2002 BCSC 1530 (CanLII), B.C.J. 2880, B.C.S.C.)

Payment is often recurrent.

The funds are typically used to finance a significant proportion of the recipient's living expenses. (.Fung v. Lin, 2001 CanLII 28193 (ON SC), 2001 CarswellOnt 488 (Ont. Fam. Ct.); Parkes v. Mones, (2001) 2001 SKQB 572 (CanLII), S.J. 777(Sask. Q.B.))

[67] I consider the instant case in the light of these factors.

• Father’s grant funds are not a return of capital. Work is expected of him as an OSAP recipient, registration and coursework in an Ontario post-secondary institution.

• Father is entitled to receipt of the funds, having fulfilled the requirements of the OSAP program.

• Payment is recurrent, made in September and January of the academic year.

• Monies from the grant are used to pay a significant proportion of Father’s living expenses. (The amount of the grant is approximately the same as Father’s income from the Board.)

• If Father’s educational costs were such that he was required to use some of the grant to pay these expenses, then this would weigh against characterization of the grant as Guideline income. That, however, is not the case. Father’s evidence establishes that his educational expenses (cost of tuition and books) are more than covered by the loans received from OSAP.[12]

[68] The grant funds are available, if Father chooses, to contribute to his children’s expenses.

[69] I find that Father’s OSAP grant constitutes Guideline income.

In B.H.B. v. N.K.H., 2012 BCPC 428 (CanLII), British Columbia's Provincial Court ruled that a party's student grants were to be included as part of her income for the purposes of determining child support. In this case, Hamilton J. reasoned that because the grants were available and non-repayable, they were included in guideline income:

[46] I prefer the reasoning of Justice Cowan in Maynard over the reasoning of Justice Burnyeat in Razavi. I agree that student loans do not appear to fall within the scope of section 19 of the Guidelines. As well, it seems to me that if I were to impute student loans into income then I should impute into a payor’s annual income funds taken from a line of credit to meet monthly living expenses. I am not aware of any decision where a court has added into a payor’s income money taken from a line of credit to cover monthly living expenses. I believe the reason for that is because the money from a line of credit is not income, but rather a loan to be repaid. While funds from a line of credit are available to the person borrowing the money to pay for monthly living expenses, that does not change those funds from a loan to income.

[47] Accordingly I will not impute into N.H.’s income the student loans she has borrowed from the government to finance her schooling and cover her living expenses while at school. N.H.’s student grants, however, will be included in her income as those funds are not repayable by N.H. N.H. did not argue that the grant monies should be excluded from her income.

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