In Ontario, business owners cannot artificially lower their spousal support by hiding money inside a corporation. Under Section 18 of the Federal Child Support Guidelines, family courts can attribute the corporation’s current pre-tax corporate income (rather than historical cumulative retained earnings) directly to your personal income for support calculations.
Operating a successful business in Ontario—whether it is a construction firm in Mississauga or a medical professional corporation in Toronto—often involves smart tax planning. 💼 A common strategy recommended by accountants is to pay yourself a modest salary while leaving the bulk of the profits inside the company as “retained earnings.” While this is perfectly legal for the Canada Revenue Agency (CRA), the Superior Court of Justice views this practice very differently during a divorce.
When calculating spousal support under the Spousal Support Advisory Guidelines (SSAG), the court’s goal is to determine your true capacity to pay. If a judge sees that you are claiming an income of $60,000 CAD on your T1 General, but your corporation has substantial pre-tax corporate income that is being kept inside the company rather than paid out, they will intervene. The court can “impute” (attribute) that pre-tax corporate income to your personal income, drastically increasing your monthly support obligations.
If you are a business owner facing a separation, or a spouse attempting to uncover hidden wealth, standard tax returns are not enough. ⚠️ It is critical to browse our directory to find an experienced Ontario family law firm. They have the expertise to navigate complex corporate structures and ensure support is based on financial reality, not just tax-optimized paperwork.
Step-by-Step Process: Attributing Corporate Income in Ontario
Untangling corporate finances during a divorce is highly complex. Whether your case is heard in Ottawa, London, or Sudbury, the process for attributing retained earnings generally follows these steps.
Step 1: Mandatory Financial Disclosure
The process begins with full transparency. 📂 Both parties must exchange a sworn Financial Statement (Form 13.1 in Ontario). As a business owner, you are legally required to provide not only your personal tax returns but also the last three years of your corporate financial statements, corporate tax returns (T2), and detailed general ledgers.
Step 2: Hiring a Chartered Business Valuator (CBV)
Family lawyers are legal experts, not accountants. To decode the corporate books, your lawyer will likely hire a Chartered Business Valuator. The CBV will analyze the company’s financial statements to determine what portion of the current pre-tax corporate income is genuinely needed to keep the business running as a going concern, and what portion represents excess funds that should be attributed to the owner for support purposes.
Step 3: Determining Legitimate Business Needs
The court will not strip a company of the cash it needs to survive. 🏭 If the corporation’s pre-tax income is being retained to buy a new fleet of commercial vehicles, survive an industry downturn, or pay off a corporate loan, those funds will generally be protected from attribution. You and your legal team must clearly prove these legitimate business needs with concrete business plans and historical financial data.
Step 4: Imputing Income under Section 18
If the CBV and the judge determine that corporate profits are being accumulated without a business purpose, Section 18 of the Federal Child Support Guidelines (which courts also apply to spousal support) is triggered. Crucially, as established in Thompson v. Thompson, 2013 ONSC 5500, the starting point under Section 18 is the corporation’s current “pre-tax corporate income” for the most recent year, not historical “retained earnings,” which are cumulative and do not necessarily represent liquid cash. The judge will calculate the “grossed-up” value of the available pre-tax income and add it to your personal income.
Step 5: Calculating Support via SSAG
Once your true, imputed income is established, the lawyers run the numbers through specialized software (like DivorceMate) using the Spousal Support Advisory Guidelines. 💵 This generates a low, mid, and high range for monthly spousal support, which forms the basis for your final separation agreement or court order.
How Much Does it Cost in Ontario?
Litigating corporate income is one of the most expensive areas of family law. As of May 2026, you should prepare for the following costs in CAD:
- Family Law Firm Fees: High-net-worth family lawyers in Ontario typically charge between $450 and $850 CAD per hour.
- Chartered Business Valuator (CBV): A comprehensive income report and corporate valuation generally costs $7,500 to $20,000 CAD, depending on the complexity of your holding companies.
- Litigation Costs: If the dispute goes to a full trial at the Superior Court of Justice, total legal fees can easily exceed $50,000 CAD per spouse.
| Type of Corporate Cash / Income | How the Family Court Views It | Impact on Spousal Support |
| Funds required for payroll & inventory | Legitimate operating expense | No impact (Protected) |
| Excess pre-tax corporate income left in the company | Personal income avoidance | Attributed to personal income under Section 18 |
| Personal expenses run through the business | Imputed income / Hidden perks | Grossed-up and added to income |
How Long Does the Process Take?
Corporate divorces require deep financial digging and patience.
- Financial Discovery: Gathering and fighting over corporate documents usually takes 3 to 6 months.
- CBV Reporting: An independent valuator typically needs 2 to 4 months to produce a finalized income report.
- Trial Resolution: If a mediated settlement cannot be reached, waiting for a trial date in Ontario can take 1.5 to 3 years.
Frequently Asked Questions (FAQ)
Can I just lower my salary to avoid paying high support?
No. If an Ontario judge believes you are intentionally under-employing yourself or artificially suppressing your salary while the business remains profitable, they will impute an income to you based on what you *should* be earning or what the company is actually making.
What if I have minority business partners?
If you do not have sole control over the company (e.g., you only own 30% of the shares), it is much harder for the court to attribute retained earnings to you, because you do not have the unilateral power to declare dividends and pull the cash out.
Will my spouse get half of my business?
Spousal support and property division (equalization) are two separate legal concepts. While your spouse may be entitled to half the *value* of the business grown during the marriage, spousal support is an additional monthly payment based on your ongoing income streams.
Do personal expenses paid by the company count as income?
Yes. If your corporation pays for your cell phone, vehicle lease, meals, or travel, the court will calculate the pre-tax value of those “perks” and add them directly to your personal income for support purposes.
What is the difference between retained earnings and pre-tax corporate income?
Under Section 18 of the Guidelines, the court’s starting point is the corporation’s current ‘pre-tax corporate income’ for the most recent year, not its cumulative ‘retained earnings.’ Retained earnings represent the historical, accumulated net profits of the company since its inception and do not necessarily reflect liquid cash readily available to be drawn by the shareholder as income.
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