Are RRSP withdrawals included in income for support purposes?
During the course of a separation, sometimes one or both spouses’ changing financial circumstances cause them to make withdrawals from their RRSPs. Do these RRSP withdrawals constitute income for support purposes?
Child Support
The Ontario Court of Appeal held in Fraser v Fraser, 2013 ONCA 715 (ONCA) that RRSP withdrawals are “presumptively part of a spouse’s income for child support purposes.”
Furthermore, section 16 of the Child Support Guidelines, outlines that:
Subject to sections 17 to 20, a spouse’s annual income is determined using the sources of income set out under the heading “Total income” in the T1 General form issued by the Canada Revenue Agency and is adjusted in accordance with Schedule III.
RRSP withdrawals are found under the heading “total income” on a T1 General form.
However, section 17(1) of the Child Support Guidelines allows the payor spouse to make the argument that their “total income” on their Income Tax Return should not be their income for support purposes. Section 17(1) provides that, if the payor spouse can show that the determination of their annual income under section 16 of the Child Support Guidelines would not be the fairest determination of their annual income, a court may:
"Have regard to the spouse’s income over the last three years and determine an amount that is fair and reasonable in light of any pattern of income, fluctuation in income, or receipt of a non-recurring amount during those years."
For instance, if a spouse makes an RRSP withdrawal on a one-time basis, for a specific purpose such as paying legal bills, it may not be included in their income for support purposes (Ludmer v Ludmer, 2014 ONCA 827; Foley v. Weaver, [2010] O.J. No. 2741 (ONSC)).
Spousal Support
RRSP withdrawals may well not be included in income for spousal support purposes if they have already been equalized, in order to prevent double-dipping (Horowitz v. Nightingale, 2015 ONSC 190). However, if spousal support is regular, and a spouse’s only source of income, it is more likely to be included in their income for the purpose of determining support (Edgar v. Edgar, 2012 ONCA 646).
