It Is The Requesting Party’s Onus To Raise The Tax Considerations Of Lump Sum Spousal Support
Author(s): Melanie A. Larock
October 23, 2023
Take a coffee break with Melanie Larock and read a weekly blog post about family law decisions released by the Court of Appeal for Ontario.
In the Ontario Court of Appeal decision of Barn v. Dhillion, 2023 ONCA 654 (released October 6, 2023, click here to view), the appellant claimed that the trial judge had failed to net down the lump sum award of retroactive spousal support to account for the fact that he would have otherwise received the income tax deduction if the payments were periodic support payments. The Court stated:
“As this court held in Fielding v. Fielding, 2015 ONCA 901, 129 O.R. (3d) 65, at para. 54, judges are not required to make tax adjustments for retroactive spousal support awards. Judges cannot be expected to familiarize themselves with and consider of their own motion the tax implications of the support orders they make. A party that wishes to have the tax implications of a retroactive spousal support order considered should specifically request this before the trial judge and provide the guidance the trial judge needs to accomplish this. The appeal record before us does not demonstrate that this was done, which may well explain why this issue was not addressed by the trial judge.”
The Court of Appeal further went on to state that a trial judge’s decision to adjust a retroactive spousal support order on account of tax implications is discretionary and based on whether doing so is required to achieve a fair support award. In this case, the Court of Appeal commented that because the appellant’s income had been imputed to him due to non-disclosure and as he had claimed no income to CRA and thus did not pay tax, it would not be fair to reduce the lump sum award. Specifically, “[t]o provide a deduction from spousal support payments based on attributed income could well result in a windfall to the appellant.”
This case is a good reminder that a request must be made to discount the lump sum award (and the amount of the discount) to take into account the tax-free nature of the lump sum payment and evidence led, and submissions made to address this issue. There are also opportunities to make arguments against discounting the lump sum award in the interest of fairness.
About Melanie Larock
Melanie Larock is a family law litigator and a partner in Thomson Rogers’ Family Law group. Melanie’s focus is on all areas of family law with a particular emphasis on complex financial issues and high conflict parenting disputes. Melanie was trained by an illustrious litigator, and she is a self-proclaimed evidence law nerd.