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Spousal Support Advisory Guidelines:
A Draft Proposal

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APPENDIX C
DETAILED CALCULATIONS UNDER THE BASIC WITH CHILD SUPPORT FORMULA

In this Appendix, for those who want to know, we provide the details of how calculations are done under the basic with child support formula and how the spousal support numbers in the examples were generated. Some calculations were done with the benefit of current computer software. Some others had to be done manually, by iteration or trial and error. In completing these sample calculations, we have used the DIVORCEmate software and its terminology (although the numbers are almost identical using ChildView, even if the terms differ.) Once software developers have made the necessary programming changes the calculations required by this formula will be much easier.

The purpose of these calculations is to obtain a figure for individual net disposable income for each spouse, which is net income after adjustment for each spouse’s child support obligations. What is left is a pool of net income to be divided between the spouses as individuals, by means of spousal support. Here we are presenting the details of a simple case, to illustrate the method and the calculations.

For the purposes of this explanatory appendix, we will use the numbers from Example 6.1 involving Ted and Alice who reside in Ontario.

Ted and Alice have separated after 11 years together. Ted works at a local manufacturing plant, earning $80,000 gross per year. Alice has been home with the two children, now aged 8 and 10, who continue to reside with her after separation. After the separation, Alice found work, less than full-time, earning $20,000 gross per year. Alice’s mother provides lunch and after-school care for the children, when required, for nothing.

Ted will pay the Ontario table amount for child support, $1,031 per month. For simplicity, we assume there are no s. 7 expenses.

(1) Determine the Guidelines incomes of the spouses

We start with the Guidelines income of each spouse, essentially a gross income measure. Ted’s gross employment income is $6,667 monthly ($80,000 per year), Alice’s is $1,667 monthly ($20,000 per year).

(2) Deduct child support from the payor spouse’s income

Ted will pay child support of $1,031 per month for two children using the Ontario table amount. There are no s. 7 expenses and hence no contributions. The computer software automatically deducts Ted’s child support payments from his net disposable income.

(3) Deduct child support amounts from the recipient spouse’s income

The software includes Ted’s child support payment in Alice’s net disposable income, which is why we call this her family net disposable income. To obtain Alice’s individual net disposable income, our first step must be to back-out or subtract this child support amount from Alice’s net disposable income.

But that is not enough. Alice also contributes to the support of the two children, directly through expenditure of her own net income. In a formula, we have to capture that amount and we use Alice’s notional table amount as a proxy measure for that contribution, as is explained in Chapter 6. In this case, that amount would be $285 monthly, for two children, on an Ontario income of $20,000. Thus, a second amount must be backed out or deducted on Alice’s side, this notional table amount of $285. If there were s. 7 expenses, we would also have to deduct Alice’s contribution to those s. 7 expenses. These amounts have to be deducted manually, as the current software does not do this.

(4) Do not deduct government benefits and refundable credits from the spouses’ incomes

After some uncertainty, we decided not to deduct government benefits and refundable credits from the spouses’ incomes. These amounts are automatically included in the family net disposable incomes used by the software. For the most part, in practical terms, this means we did not deduct these amounts from the recipient spouse’s income. As for payors, only low-income payor spouses obtain any of these (basically the GST credit) and most of those low-income spouses will not be paying spousal support.

We did consider backing out the child portion of these benefits, since most of these benefits are tied to the children in the recipient spouse’s care, e.g. the Child Tax Benefit, part of the GST credit and the various provincial programs. For the reasons explained in Chapter 6, we decided not to do so.

In our case, only Alice has such benefits. If only the table amount of child support were paid and no spousal support, Alice’s government benefits and refundable credits would be $492 monthly ($5,900 annually). By contrast, at the upper end of the spousal support range, $1,287 monthly, those benefits and credits are reduced to $230 monthly.

(5) Deduct income taxes and other deductions from each spouse’s income

The software automatically deducts income taxes and other deductions from each spouse’s net disposable income, adjusting for the amount of spousal support transferred. Federal and provincial income taxes are calculated, as well as employment insurance premiums and Canada Pension Plan contributions. In our example of Ted and Alice, there are no deductions other than these statutory deductions. Other permissible deductions are discussed in Chapter 6.

This step and the next step are actually done together, as taxes and other deductions will vary as we iterate to obtain the appropriate division of individual net disposable income for spousal support purposes.

(6) Determine the spousal support required to divide INDI

The next step is to determine the amounts of spousal support required to leave each spouse with the desired amount of individual net disposable income (INDI) at each end of the formula’s range, either 46/54 at the upper end or 40/60 at the lower end.

We can start with the calculation at the upper end of the range. On the payor’s end, the software deducts child and spousal support and adjusts taxes for various proposed amounts. On the recipient’s end, however, the child support amounts (each spouse’s) have to be subtracted manually, but the software adjusts taxes as well as government benefits and refundable credits.

Ted starts with a gross income of $6,667 monthly. Out of that will come $1,031 child support, an estimate of $1,287 spousal support, $1,226 in taxes, $217 in EI/CPP deductions, leaving a net monthly disposable income of $2,906. The software does all of these calculations automatically. This amount is also Ted’s individual net disposable income.

Alice’s family net disposable income is shown as $3,792 monthly for herself and the children. Her gross monthly income is $1,667, plus child support received, at $1,031, plus spousal support at $1,287, less taxes of $322, plus benefits and credits of $230, less EI/CPP of $101. To obtain Alice’s individual net disposable income, we have to deduct child support paid by Ted of $1,031 and then deduct her notional table amount of $285, which leaves Alice with $2,476 monthly.

If we add together the individual net disposable incomes of Ted ($2,906) and Alice ($2,476), the total is $5,382. Alice’s share would be $2,476, or 46 percent of the total INDI of $5,382.

Here I have used the final spousal support figure of $1,287, but that number was only obtained by iterating, by trial and error, until the right result is obtained. This process is no different from what the spousal support calculator does with family net disposable income in the DivorceMate software.

For Ted and Alice, the low end of the range turns out to be $697. According to the software, at that amount of spousal support, Ted’s net disposable income is $3,283 monthly. The software shows Alice’s family NDI as $3,505. But Ted’s child support of $1,031 and Alice’s notional table amount of $285 have to be deducted, to leave Alice with an individual net disposable income of $2,189 monthly. This would leave Alice with $2,189, or 40 percent of the total individual net disposable income of $5,472.