Connect with us

Local Business

Are You Considered Common-Law For Canadian Tax Purposes?

Published

7 minute read

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 [2008] 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:

1) Shelter

– 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?

3. Services
What was the conduct and habit of the parties in relation to:
– preparation of meals
– washing and mending clothes;
– shopping
– household maintenance; and
– any other domestic services?

4. Social
– 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?

5. Societal
– 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?

7. Children
– 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.

CEO | Director, Canadian Tax Advisory CGL Strategic Business & Tax Advisors With the Income Tax Act always by his side on his smart-phone, Cory has taken tax-nerd to a whole other level. His background in strategic planning, tax-efficient corporate reorganizations, business management, and financial planning bring a well-rounded approach to assist private corporations and their owners increase their wealth through the strategies that work best for them. An entrepreneur himself, Cory started CGL with the idea that he wanted to help clients adapt to the ever-changing tax and economic environment and increase their wealth through optimizing the use of tax legislation coupled with strategic business planning and financial analysis. His relaxed blue-collar approach in a traditionally white-collar industry can raise a few eyebrows, but in his own words: “People don’t pay me for my looks. My modeling career ended at birth.” More info: https://www.CGLtax.ca/Litzenberger-Cory.html

Follow Author

Business

Downtown Business Spotlight: Root 51 Salon and Spa

Published on

This week’s Business Spotlight shines on Root 51 Salon & Spa! This unique establishment is located right on 4814 51 St and offers anywhere from haircare to spa treatments to relax and pamper. We spoke with the owner to learn more about this wonderful establishment!

What is your business?
Our business is a small locally owned salon & spa.

When did your business open?
We downsized & renovated this main floor in 2016 & changed our name to Root51 (previously Techniques Hair Therapy & Day Spa in the Millennium Center for 2 decades!)

What makes your business unique?
We have asked our valued guests this same question the responses we got: our education, our flexibility to accommodate, our selection & knowledge in our top-shelf natural products for both hair & skin, our prices are extremely reasonable for the level of experience (over 30 years) & education (over 100K worth of education!!!) (in a big city I would charge 35-40% more for the same treatments), and we work hard and are very proud of this next one…our Cleanliness – often they say your place is always spotless! (even before Covid!!)

What are some products/services that you offer?
Full-service Salon hair Care & Spa treatments that are non-invasive. Michele specializes in colours, balayage & ombre, colour corrections & blondes. Smoothing treatments are in high demand for silky soft straight looks and perms for waves or more body. With 30 years of cutting hair, some guests have said “that’s the best-shaped haircut I ever had.”
Spa treatments are effective and relaxing with visible results after one treatment ~ home care is a must because maintenance is easy than correction. Our skincare line is exclusive to us in RD and is composed of sea plants and seawater with many benefits to your facial skin as well as your body and well-being!

Why did you choose Downtown Red Deer as the location for your business?
In 2000, the Millennium Center was a brand new and very central location — when we changed the location to 2 block north on 51 st ~ we wanted to be able to still cater to our professional corporate downtown business people.

What do you think makes Downtown vibrant?
I believe it’s the local entrepreneurs big & small that make downtown a vibrant place.

Website: Root 51 Official Website
Facebook: Root 51 Facebook Page

Continue Reading

Alberta

Downtown Business Spotlight: Artisan Food Market on Ross

Published on

This week’s Business Spotlight shines on Artisan Food Market on Ross! This unique restaurant is located right on Ross Street (106, 4916 Ross Street) and offers a large selection of locally made products. We spoke with the owner to learn more about this wonderful establishment!

What is your business?
Artisan Food Market on Ross is a specialty food store. We carry a large selection of local, national, and international foods and ingredients.

When did your business open?
We opened on April 1, 2020.

What makes your business unique?
We carry a large selection of local items and have a variety of frozen meals.

What are some products/services that you offer?
Customers can place orders for their favourite D Dutchmen Dairy or Black Forest German Bakery products and the requested items will get delivered to our store the following week. Additionally, customers can shop online and have their products delivered to their homes even during the times that we are closed. If a customer wishes to place an order they can simply visit us at www.ArtisanFoodMarket.ca.

Why did you choose Downtown Red Deer as the location for your business?
As a Red Deerian, I wanted to make a positive impact for our downtown by setting up a local market store right here.

What do you think makes Downtown vibrant?
I love the flower gardens at the city hall and the assortment of independent shops in our downtown core.

Finish this sentence: I love Downtown because…
It’s my home and it’s my place for adventure.

Website: Artisan Food Market on Ross Official Website
Facebook: Artisan Food Market on Ross Facebook Page
Instagram:
@artisanfoodmarket

Continue Reading

june, 2021

tue04may(may 4)4:57 pmwed30jun(jun 30)12:00 pmMove Your Mood Family Challenge (June)(may 4) 4:57 pm - (june 30) 12:00 pm

Trending

X