By: Cory G. Litzenberger, CPA, CMA, CFP, C.Mgr – President & Founder of CGL Strategic Business & Tax Advisors
This time of year many couples come to us asking “should we choose to file single or common-law?”
Unfortunately, in Canada, it is not a choice… no matter what your friend said.
The Canadian system looks at household income to determine your eligibility for tax credits and benefits like the GST Credit, the Canada Child Benefit, and various types of social assistance programs.
First the boring stuff:
You can find the legal definition of “common-law partner” in Subsection 248(1) of the Income Tax Act, but in layman terms. They can be simplified into:
Have you lived together for more than a year in a “conjugal relationship” (more on that later) in which you were not separated (ie: a break up) for more than 90 consecutive days during that period, or
Have you lived together for one day and you are both a parent of the same child?
Now my colleagues will point out some rare exceptions to the above, but for most of you reading that’s as simple as it gets.
I must also point out that the definition of “common-law” for provincial marital or interdependent property laws is different from the definition for income tax purposes and can vary by province. Usually, the income tax definition is a shorter time test.
“OK, But what does “conjugal relationship” mean?”
If you are a boring tax nerd like myself, you would understand that the only difference between marriage and common-law on a tax return is that common-law is in a conjugal relationship.
(insert laugh track here)
For the rest of you that don’t see the humour, the courts have actually come up with a series of tests to consider on whether or not a conjugal relationship exists.
The Tax Court of Canada in Hendricken v The Queen, 2008 TCC 48 referenced a different court’s 1980 ruling… (yes, I know… a ruling before the first space shuttle took flight… before Diana Spencer married Prince Charles… and before the first female justice was appointed to the US Supreme Court)
… but the ruling in 1980 was for a different purpose, but has been expanded and clarified over the year, and Hendricken  stated that it should apply similarly when it comes to the Income Tax Act common-law requirement of “conjugal relationship”.
As such, there are 7 areas of consideration for a definition of “conjugal relationship”.
Basically, it is a combination of factors that must be viewed as a whole. It isn’t a black and white test, nor is it a simple yes/no. You have to weigh each one and then look at the whole picture to see if it is more likely or not that you were in a “conjugal relationship”
So here are the things to consider to figure out if you are in a common-law partnership for tax purposes as according to the Canadian courts:
– Did the parties live under the same roof?
– What were the sleeping arrangements?
– Did anyone else occupy or share the available accommodation?
2. Sexual and Personal Behaviour
– Did the parties have sexual relations? If not, why not?
– Did they maintain an attitude of fidelity to each other?
– What were their feelings toward each other?
– Did they communicate on a personal level?
– Did they eat their meals [together?]
– What, if anything, did they do to assist each other with problems or during illness?
– Did they buy gifts for each other on special occasions?
What was the conduct and habit of the parties in relation to:
– preparation of meals
– washing and mending clothes;
– household maintenance; and
– any other domestic services?
– Did they participate together or separately in neighbourhood and community activities?
– What was the relationship and conduct of each of them toward members of their respective families and how did such families behave towards the parties?
– What was the attitude and conduct of the community toward each of them and as a couple?
6. Support (economic)
– What were the financial arrangements between the parties regarding the provision of or contribution toward the necessaries of life (food, clothing, shelter, recreation, etc.)?
– What were the arrangements concerning the acquisition and ownership of property?
– Was there any special financial arrangement between them which both agreed would be determinant of their overall relationship?
– What was the attitude and conduct of the parties concerning the children?
As you can see, there are many different things to consider.
Also, you must remember, that it this isn’t a criminal proceeding so the government does not have to prove beyond a reasonable doubt, and they also don’t have to assume your innocence.
As a result, whichever filing position you are trying to prove, common-law or single, and you are not sure as to which you might be, document as many answers to the questions above as you can while they are fresh in your mind, rather than trying to remember in two years when the CRA does the audit.