How does Spousal Support work?

A summary on what spousal support is and how it works in Ontario.

What is spousal support?

It is financial assistance from one spouse to the other after the breakdown of a relationship.

Spousal support can apply whether you lived together as married partners or as a common-law couple.

When would it start?

The entitlement to it arises after the birth of a child, where you have been living together in a relationship, or after you have been living together as conjugal partners for not less than 3 years.

How does it get paid?

It can be paid monthly, in which case any monthly amount is periodic according to the Income Tax Act, and it is taxable income in the hands of the receiver of the money and is tax-deductible in the hand of the payer of the support. For example, Christopher pays Robyn $2,000 per month in spousal support. Let’s assume Christopher earns $74,000 per year as a salaried employee. He claims $24,000 on his income tax as deductible support, which then makes his new taxable income $50,000 per year. Robyn has to add it to her earned income and pay tax on it to Revenue Canada.

Spousal support can also be paid in one lump sum. Assume Christopher and Robyn negotiated a $100,000 lump sum payment of support. If paid in a lump sum, it is not taxable. Christopher cannot deduct any of the $100,000 and Robyn does not claim it as income.

How is the amount determined?

This is where it gets a bit complicated.

Spousal support is very different from child support. For child support, if our couple, Christopher and Robyn had a child, it would be easy to look on the Child Support Guidelines and determine the amount of child support. You would search for the level of income Christopher has. Then pick the number of children. In this case, one. To make the example easier, we will assume Christopher parents their child 35% of the time, which means he pays the regular amount or Table amount. It is one number.

Spousal support is not at all similar. You cannot simply put in both Robyn and Christopher’s incomes and come up with one number for spousal support.

The first hurdle is whether one person has an entitlement to spousal support. No entitlement, no support even if there is a difference in incomes.

Assuming entitlement, you then need to determine the amount.

There are many variables to how the amount is calculated, and when it is calculated, it is based upon the Spousal Support Advisory Guidelines. Those guidelines will give a minimum of 3 different numbers or ranges. A low range, a mid-range and the high range. There is also a calculated equalizing of incomes of both spouses in certain situations.

Where you land in those ranges depends upon your situation.

The guidelines have some key calculating factors such as each person’s age, how long the total relationship was, incomes of both partners, who pays how much of your children’s special expenses, tax deductions both partners have, and how much parenting time is with each parent, to name a few.

Then there are factors which move you up or down in the range. Those include such things as are there dependent children, how much child support is being paid, is there any compensatory basis for the support, are there any special needs for the children, how are your assets being divided, is there a disabled spouse are just a few of the many factors that get reviewed.

As you can see, not a quick and simple exercise.

How long is it payable?

If payable monthly, duration is often determined to be from a minimum of 50% of the length of the relationship to 100% of the relationship. Back to Christopher and Robyn again. Let’s assume they were married for 16 years and have one daughter, Winnie. Winnie is 10 years old. If we assume they were 16 years together, and assume Robyn is entitled to support, the support would typically be payable for a minimum of 8 years to a maximum of 16 years. The age of your child can change things as if Winnie was younger, the support can extend to the year that Winnie turns 18, which means 18 years of support. This is to show how the children can impact what happens with spousal support.

The duration can be indefinite, meaning there is no limit if you have had a long term relationship. Let’s change the relationship terms for Christopher and Robyn. Let’s say they were together for 25 years and Winnie is now graduated from college and on her own. Let’s say Robyn is 45 years old. In this case, Robyn’s age plus the total length of their relationship are over 65. 65 is a factor that makes spousal support indefinite.

Indefinite does not mean support is for life, it means it will keep going and is open to being changed if there is a change in someone’s financial circumstances. There are multiple events that can change the support. Those can be a change in the incomes of either spouse, an ending of child support, re-marriage of the receiving spouse, the impact of a second family or any other type of change that can impact a change in the situation from the facts that existed for the children and the spouses at the time the support was first determined.

How does it get started?

This is typically by a written agreement between the two spouses, called a Separation Agreement. It can also be by a Court order, which can be under Ontario laws or under Federal laws.

For a periodic amount payment of support to be taxable and tax deductible, it has to be in writing, witnessed and dated with clear language on the support terms for Revenue Canada to be satisfied it is spousal support and not child support. You cannot simply make a payment and then claim it with no agreement.

As you can tell, spousal support is not straight forward. If you want any help to determine how it will work in your situation, please book a consult with us. We’re happy to help you understand how it applies to you.