Introduction to Imputing Income
In British Columbia family law, child and spousal support calculations are generally based on the payor's actual income. However, disputes often arise when a payor earns significantly less than their capacity allows. Under Section 19(1)(a) of the Federal Child Support Guidelines, a court may impute income to a spouse who is intentionally under-employed or unemployed, unless that status is required by the needs of a child or reasonable health and educational needs.
A significant decision from the Court of Appeal for British Columbia, S.A. v. Z.R., 2026 BCCA 19, has provided crucial clarity on the evidentiary burden in these cases. The Court established that once voluntary under-employment is shown, the burden shifts to the under-employed parent to justify their reduced income.
Case Background: S.A. v. Z.R.
The case involved a couple who had been married for 20 years and shared three children. The appellant father (S.A.) had a successful career in marketing, holding high-paying executive roles at companies like Johnson & Johnson. His work historically required significant travel and living abroad, with declared income in 2018 reaching over $540,000.
Following the parties' separation in 2019, the father resigned from his position, citing a desire to be more available for his children, particularly given the mental health challenges faced by one of the children. At the time of trial, he was working a contract position in Vancouver earning approximately $204,000. He argued that he could not earn his previous salary levels because the Vancouver market was limited and his parenting responsibilities prevented him from traveling.
The trial judge did not accept that his full reduction in income was necessary. Consequently, she imputed an annual income of $325,000 to him for support purposes—a figure between his current earnings and his pre-separation income.
The Shifting Burden of Proof
The central legal issue on appeal was who bears the burden of proving whether under-employment is required by the needs of a child. The appellant argued that the recipient spouse must prove that the under-employment was not required.
The Court of Appeal disagreed, dismissing the appeal. Writing for the Court, Madam Justice Horsman clarified the legal standard in British Columbia. The analysis established a two-step framework regarding the burden of proof:
First, the party seeking to impute income must establish a prima facie case of voluntary under-employment or unemployment. In this case, the drastic drop in the father's income following his voluntary resignation satisfied this requirement.
Second, once that prima facie case is established, the evidentiary burden shifts to the under-employed spouse to demonstrate that their lower income is required by the needs of a child or their own reasonable needs.
The Court aligned BC law with appellate decisions from Ontario and Manitoba, such as Drygala v. Pauli and Horbas v. Horbas. The reasoning is practical: the parent choosing to work less is in the best position to provide evidence regarding how their specific parenting duties impact their work capacity.
Analysis of the Decision
The Court of Appeal upheld the trial judge's decision to impute income at $325,000. The Court noted that while the father had a genuine desire to be present for his children, the evidence did not support the conclusion that his parenting duties required such a steep reduction in earnings. The trial judge found that his skills were transferrable and that he could organize his employment to incorporate some travel, which would open up more lucrative opportunities than those strictly available in Vancouver.
Furthermore, the Court upheld the trial judge's order that future spousal support reviews would use the imputed income of $325,000 as a baseline or floor, subject to upward adjustment if actual earnings were higher. This approach prevents the payor from repeatedly relitigating their earning capacity while ensuring the recipient benefits if the payor's income recovers.
Finally, regarding Section 7 special expenses, the Court upheld the exclusion of post-secondary education costs because the paternal grandmother was currently paying them. The Court reasoned that if this third-party support ceased, it would constitute a material change in circumstances allowing for a variation of the order.
Implications for British Columbia Family Law
This decision has significant implications for high-income earners who choose to downshift their careers following a separation. It reinforces the principle that a parent's obligation to support their children takes precedence over personal lifestyle choices.
The clear articulation of the shifting burden of proof means that payors cannot simply assert that their parenting duties prevent them from working. They must provide concrete evidence linking their reduced workload to specific needs of the children that cannot be met otherwise.
Practical Advice for Family Law Litigants
For those involved in support disputes where capacity to earn is an issue, this case offers several practical takeaways:
If you are the payor reducing your work hours, document exactly why this is necessary. General assertions about needing to be available for children are insufficient. You must show that the specific needs of the child require a reduction in work that corresponds to the reduction in income.
If you are the recipient seeking to impute income, focus your initial evidence on demonstrating the voluntary nature of the employment change and the payor's capacity to earn. Once you establish the drop in income was voluntary, the onus falls on the other party to justify it.
Finally, understand that courts have broad discretion. In S.A. v. Z.R., the court chose a middle ground—imputing income higher than actual earnings but lower than historical highs—to balance the financial obligation with the reality of parenting responsibilities.