High Income Earners and Spousal Support

If you are a high-income earner in the process of divorcing your spouse, you might be wondering about how your support obligations to him or her will be calculated. (This presumes that you and your spouse have not already settled this, through a separation agreement or other domestic contract).

There are special principles under Canadian law pertaining to the spousal support payable by high-income earners, specifically those who earn over $350,000 per year. This article will touch upon the guiding principles that you should know.

The Basics Around Spousal Support

Under the Canadian Family laws relating to divorce, the task of determining spousal support – regardless of your income level – begins with a fairly straightforward process. Under the federal Divorce Act, R.S.C. 1985, R.S.C. 1985, c. 3 (2nd Supp), your spouse must establish that they have suffered economic disadvantage from the marriage, and that they will have an ongoing financial need after your split is final.

Once this threshold has been satisfied, and a judge has determined you do have a legal obligation to pay some level of spousal support, the next task is to set the precise amount. The judge will start by looking at the Spousal Support Advisory Guidelines (SSAGs) – which are technically not legislation, but are nonetheless the recognized starting-point for a judge’s assessment.

Based on both your incomes and other personal factors, the SSAGs contain support amount “Tables” that guide the judge on setting an appropriate figure. Those Tables also list various support ranges and durations that are suggested in various circumstances.

However, in all cases the judge had discretion to deviate from the SSAGs Tables in appropriate circumstances, after considering both your and your spouse’s current and past circumstances, relative need, your ability to pay, and other specified factors. The judge’s mandate is to arrive at a spousal support amount that meets the list of objectives specifically set out in s. s. 15.2(6) of the Divorce Act, which reads:

Objectives of spousal support order

15.2 (6) An order made under subsection (1) or an interim order under subsection (2) that provides for the support of a spouse should

• (a) recognize any economic advantages or disadvantages to the spouses arising from the marriage or its breakdown;
• (b) apportion between the spouses any financial consequences arising from the care of any child of the marriage over and above any obligation for the support of any child of the marriage;
• (c) relieve any economic hardship of the spouses arising from the breakdown of the marriage; and
• (d) in so far as practicable, promote the economic self-sufficiency of each spouse within a reasonable period of time.

Generally – and with some key exceptions – the relationship between your income and your support obligations is directly proportionate: The more you earn, the more you are usually required to pay.

Your High Income as an Added Factor

One of those exceptions is where you earn a very high annual income – specifically $350,000 or more. Under the Divorce Act and the SSAGs, there are special considerations that come into play once you reach this income threshold.

However this does not mean that your spousal support obligation will be “capped” at the amount payable at the $350,000 income mark. To the contrary: If you happen to earn in the many millions, the judge might still use the SSAGs as a starting point for decision-making, but can deviate from them significantly after looking at your facts. The judge has full discretion to make an individualized, fact-specific order that can be less or more – and even vastly more – than the SSAGs-dictated amount at the $350,000 threshold (Halliwell v. Halliwell, 2017 ONCA 349, 138 O.R. (3d) 671).

In this regard, the judge’s decision-making in your case will be guided by various principles that have been developed through a series of court rulings from across Canada. They are summarized in a recent Ontario decision called Hourtovenko v. Hourtovenko, 2021 ONSC 7377:

[65] For high income-earners (for the purpose of the Guidelines, individuals earning more than $350,000.00 annually), the court may elect to depart from the SSAGs. The Saskatchewan Court of Appeal identified the following principles in Potzus v Potzus, 2017 SKCA 15 (para. 128):

The Revised Guide summarizes the principles that have emerged from case law addressing incomes above the $350,000 ceiling:

• The formulas for amount are no longer presumptive once the payor’s income exceeds the “ceiling”.
• The ceiling is not an absolute or hard “cap”, as spousal support can and usually does increase for payor incomes above $350,000.
• The formulas are not to be applied automatically above the ceiling, although the formulas may provide an appropriate method of determining spousal support in an individual case, depending on the facts.
• Above the ceiling, spousal support cases require an individualized, fact-specific analysis. It is not an error, however, to fix an amount in the SSAG range … Evidence and argument are required.
• Where the payor’s income is not too far above the ceiling, the formula ranges will often be used to determine the amount of spousal support, with outcomes falling in the low-to-mid range for amount. How far is “not too far above” is still not clear. Somewhere between $500,000 and $700,000, it seems.
• Once the payor’s income is “far” above the ceiling, then the amount of support ordered will usually be below the low end of the SSAG range, but SSAG ranges are still calculated and sometimes the outcome will fall within the SSAG range.

[66] At the end of the day, the court has an overriding discretion in deciding whether an award of spousal support is appropriate and, if so, in what amount. The exercise of such discretion will depend on the particular facts of each case, having regard to the factors and objectives established in the governing legislation (Moge v. Moge, (p. 866); Bracklow v. Bracklow, para. 53).

After applying these principles to your unique situation, the judge will then have to decide on the range of support that might be appropriate for you to pay. If you earn above $350,000, then the judge is likely to take one of two approaches to your circumstances:

• “Minimum Plus”. This simply means that at the $350,000 level the SSAGs provide the judge with an initial, minimum support amount. Then the judge will “top up” the support obligation, using its discretion.
• “Pure Discretion”. This avoids the SSAGs-suggested minimum, and allows the judge to simply use its discretion to arrive at an appropriate support amount, after looking at all the usual considerations.

Individualized Outcomes

The judge’s calculations on spousal support will be detailed and complex, and will be customized to your unique circumstances. This built-in judicial leeway is designed to recognize that support amounts that are tied to higher incomes are harder to calculate, due to unique family, business, financial, and lifestyle factors.

For example, your high income may come from a successful family business, corporate shareholding, or complex trust arrangements – or some combination of them all. Your future income trajectory may also be harder to predict, due to your having stock options, dividends, or some other variable revenue source. And there is also the difficult assessment of what is considered post-divorce “need”, when you and your spouse enjoyed an unusually affluent lifestyle during your marriage.

With that said, this built-in flexibility does not mean that a court must assume that as a high-income earner, your resources for paying support are unlimited. In a recent case called Hall v. Galbraith, 2023 ONSC 2161 (CanLII) the court observed:

[45] The daily docket of this court consists of disputes among a wide cross-section of Ontario’s socio-economic strata. Every case must be considered on its own facts. Despite the development of tables and guides for making court orders more consistent and efficient, the fact that the rich can usually afford to spend on commodities and services the poor can only dream about does not allow the court to assume a high-income earner has unlimited means. While the means of a low income family confine the court’s ability to squeeze blood out of the stone in the interests of shielding the children from the economic consequences of marital breakup, the court does not have carte blanche to use the higher earner’s paycheque to shield the other spouse altogether from the consequences of marital breakup. The father has not condemned his Toronto family to life in a slum, even if the mother likes to think so.

One final point: It must be stressed that in any divorce litigation, financial disclosure remains a cornerstone of the legal process, regardless of your income level. If you fail to provide full disclosure, this will only encourage – and indeed, require – the court to make educated guesses around your income and assets.

If used as a litigation strategy, this can backfire: In Lakhtakia v. Mehra, 2022 ONSC 201 (CanLII), for example, the husband was ordered to pay $20,000 a month in spousal support and another $20,000 per month in child support, based on what the court surmised was $7 million a year in income. Importantly, the court found the husband was not forthcoming around his finances, despite numerous court orders that he produce the information. He claimed he was earning only between $100,000 to $200,000 per year even though he ran 25 successful companies.

The court was highly critical of his financial evasiveness, and also found he had fraudulently transferred assets to try to avoid his divorce-related obligations to his wife. After concluding that “it is very difficult to trust the [husband]”, the court readily accepted the evidence of the wife’s expert as to the husband’s global income, assets and various corporate interests, for the purposes of calculating spousal support.

The Takeaway

If you are fortunate enough to fall into the high-income earner category, determining your spousal support obligations can be more complex than usual. Naturally you will be keenly motivated to limit the amount of support you are obliged to pay. Be sure to get good legal advice, since there can be a lot at stake.