To simplify it, basically what Stats Canada has done in using averages is look at a family with a certain income level and evaluate what percentage of its income is spent on basics, such as housing, food, and clothing. If they spend a very significant proportion of their income on those variables, meaning that there's almost nothing left over, then that qualifies them as having a low income. It's not individual families that you'd measure, and it's also done by urban areas. So for a family of three in Toronto, the low-income cut-off would be based on what the average family in Toronto would spend on basics. If a family is spending all, or almost all, of its income on basics, such as housing, clothing, and food, then it's classified as having a low income.
On May 30th, 2006. See this statement in context.