Understanding Income Imputation in Alberta and the new test: Insights from Peters v. Atchooay

In Alberta, the legal landscape for imputing income in family law cases has recently undergone a significant transformation. This change was notably influenced by the Alberta Court of Appeal’s decision in Peters v. Atchooay, 2022 ABCA 347, which has reshaped how courts address issues of income imputation for both child and spousal support.

Background on Income Imputation

Income imputation is a legal mechanism used to determine support obligations based on a party’s earning capacity rather than their actual income. Historically, Alberta’s approach required proof that a payor deliberately reduced their income with the intent to avoid support payments. This standard was established by the earlier case Hunt v. Smolis-Hunt, 2001 ABCA 229, which placed a high burden of proof on demonstrating specific intent.

Peters v. Atchooay: A Landmark Decision

The Peters v. Atchooay case marked a pivotal shift in Alberta’s approach. The Court of Appeal ruled that proving a specific intent to evade support obligations is no longer necessary. Instead, the focus now is on whether a party is earning what they are capable of earning. This means that the court will consider whether the individual is underemployed relative to their skills, qualifications, and opportunities, rather than whether they intentionally reduced their income to avoid support payments. This aligns Alberta’s standards with those of other Canadian provinces, which have long followed a more pragmatic approach to imputing income.

The decision in Peters emphasizes that courts should assess a party's income based on their earning potential rather than their actual income if there are reasonable grounds to believe they are underemployed. This shift aims to prevent individuals from manipulating their income to reduce support payments.

Implications for Spousal Support

The principles established in Peters have extended to spousal support cases as well. The recent Nykolyshyn v. Dalton, 2022 ABKB 860 case demonstrates this application, where the court applied the new income imputation standard to determine spousal support. Here, the court evaluated whether the spouse was earning in line with their capabilities, rather than accepting their lower reported income at face value.

Practical Impact

For family law practitioners and clients alike, the Peters decision simplifies the process of addressing income imputation. Rather than focusing on intent, which could be difficult to prove, courts now assess whether an individual is underemployed relative to their abilities. This approach ensures a fairer assessment of support obligations and reduces the opportunity for income manipulation.

Conclusion

The Peters v. Atchooay case has modernized Alberta’s approach to imputing income, bringing it in line with broader Canadian standards. This change enhances fairness in family law cases by focusing on an individual's earning capacity rather than requiring proof of intent to evade support obligations. As a result, courts can now more effectively address cases of underemployment and ensure that support obligations are based on realistic assessments of income potential.

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If you need more detailed insights or assistance regarding the implications of the Peters v. Atchooay decision or income imputation in family law cases, reach out to us at Stokes Law. Our experienced team is here to help you navigate the complexities of these legal changes and ensure your case is handled with the utmost care and attention. Contact us today to discuss how we can provide the support and guidance you need.

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