Spousal Support - Continued

Self-Sufficiency

Each party has a general obligation to make efforts to become independent and self-sufficient as soon as practicable (Leskun v. Leskun, 2006 SCC 25). Each case will be decided by applying the applicable legislation to the specific circumstances of the case. The criteria are set out in s. 15.2 of the DA. In the FLA, the relevant considerations are set out in s. 161 of the Act and mirror the provisions in the DA.

In general, the court will take into consideration the length of the marriage, the roles of spouses in the marriage, the needs of minor or dependent children, express or implied agreements between spouses regarding support, parties’ incomes and economic circumstances, economic advantages and disadvantages, and the parties’ respective earning capacities.

Choice of Law

Although married spouses can seek spousal support under both the DA and the FLA, the court will only order spousal support under one Act. Where the court has concurrent jurisdiction under both Acts, it is preferable to obtain an order under the DA because the FLA is subordinate to the DA as a result of the doctrine of paramountcy. The making of a support order under the DA will preclude the making of an order under the FLA. The making of an order under the FLA will not, however, preclude the making of an order under the DA.

Spousal Support Advisory Guidelines

The Spousal Support Advisory Guidelines (SSAG) is an academic paper published by the Federal Department of Justice in a final form in July 2008. The Advisory Guidelines does not deal with entitlement to support. Its aim is to assist in the calculation of quantum and duration where entitlement to spousal support is established.  Many practitioners jump to using the SSAG to determine quantum without first considering entitlement.  Be sure to consider entitlement pursuant to the criteria set out in Moge and based on the particular facts of the case.

The SSAG has two main formulae for calculating spousal support, the “without child support” formula and the “with child support” formula. The formulae generate a range of results for both quantum and duration, either or both of which may be subject to a number of exceptions, for example in cases of disability or permanent unemployment, and to restructuring, trading quantum against duration to pay more for a shorter period of time or less for a longer period of time.

The SSAG has gained wide acceptance in BC and has been described by our Court of Appeal as a “useful tool” in determining spousal support.  In reality, while not law in BC, the SSAG are always used on court and in negotiations.  The SSAG are not referenced in the FLA.

In 2006, the BC Court of Appeal in Redpath v. Redpath, 2006 BCCA 338, held that a failure to consider the SSAG where the award made is substantially higher or lower than the range suggested by the SSAG in either quantum or duration, without exceptional circumstances to explain the difference, could be grounds for an appeal.

Important points:

  1. Unlike the CSG, the SSAG has no legislative or regulatory effect and is purely advisory.  However, the court will expect counsel to provide SSAG calculations in support of their submissions whenever spousal support is at issue, and in most cases the amount of spousal support order is coincident with the ranges produced by the SSAG formulae.
  2. The SSAG does not deal with the issue of entitlement to spousal support. Therefore, do not consider the SSAG calculations until the issue of entitlement has been resolved. In most cases, the formulae will produce results for quantum and duration but the fact that results are generated does not establish entitlement.

Interim Spousal Support

Different considerations arise on an application for spousal support depending on whether the order sought is interim or final. On an interim application, the court will generally only consider whether the applicant has a prima facie need for support and the respondent’s ability to pay.

Income Tax Implications

Periodic spousal support payments made pursuant to a written agreement or court order are deductible from the taxable income of the paying spouse but are taxable income in the hands of the recipient. The recipient must pay income tax on the spousal support payments received as if it were any other kind of income.

Periodic spousal support that has been paid prior to the execution of a separation agreement can be made retroactively taxable and deductible as long as the separation agreement confirms that the payments have been made.  The parties can capture such payments from the beginning of the year immediately preceding the date of the separation agreement.

Lump-sum spousal support payments are neither taxable for the recipient nor deductible for the payor.  Spousal support calculators will take this fact into consideration when calculating potential lump payments.

Deductibility of Legal Fees

The party receiving spousal support is entitled to claim a tax deduction for that portion of his or her legal fees incurred to obtain or enforce an agreement or order for spousal support. The taxpayer must have paid the fees before they can be claimed. Legal fees incurred in defending a claim for spousal support are not deductible. 

Where the deduction is claimed, the client will ask the lawyer to provide a letter to confirm the percentage of the fees that were incurred for those purposes as most often these types of services are a portion of the lawyer’s accounts.  Therefore the time-keeping records of the lawyer are very important, especially if the matter is audited by the Canada Revenue Agency.

Community Discussion

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However, that being said, it is important for family lawyers to be able to spot a potential tax issue when considering property division.  I can recommend the following:  "Tax Matters TookKit:  Separation and Divorce", CBA March 2014 and "Tax Principles of Family Law" presented by Andrew Freedman at the National Family Law Program July 15th, 2014.