In Ontario, the calculation of child support for self-employed individuals is guided by the Child Support Guidelines (CSG). The CSG provides a framework for determining child support payments based on the income of the parent who is paying support (the “payor”) and the number of children to be supported.

For self-employed individuals, determining income for support purposes can be more complex. According to the CSG, certain deductions from self-employment income are added back to the earner’s income for the purpose of calculating child support. This is outlined in Schedule III of the CSG.

Here are the key deductions from self-employment income that are added back:

  1. Salaries, benefits, wages, or management fees, or other payments paid to or on behalf of persons with whom the spouse does not deal at arm’s length(section 9): These amounts are added back unless the spouse establishes that the payments were necessary to earn the self-employment income and were reasonable in the circumstances.
  2. Deduction for an allowable capital cost allowance with respect to real property(section 11): This amount is added back to the income.
  3. Amounts included in income that are required by the partnership or sole proprietorship for purposes of capitalization(section 12): These amounts are deducted from the self-employment income.
  4. Employee benefits from options to purchase shares of a Canadian-controlled private corporation(section 13): The difference between the value of the shares at the time the options are exercised and the amount paid by the spouse for the shares, and any amount paid by the spouse to acquire the options to purchase the shares, is added to the income for the year in which the options are exercised.

In addition to the add-backs set out above, other common add-backs are: meals and entertainment, business use of the home, phone and car expense (or a portion thereof), travel and any other “soft” expense written off for tax purposes that was not necessary for the operation of the business.

The court has discretion in determining what is a reasonable expense and what should be added back to the income for support purposes. The court will consider the nature of the expense, the necessity of the expense for the generation of income, and whether the amount of the expense is reasonable.