The taxman cometh

Queer and living with your loved one? Revenue Canada is about to come knocking.

Starting this year, all same-sex common-law couples – everyone who has been living together in a conjugal relationship for more than one year – must declare each other’s incomes for federal tax purposes.

Income tax isn’t the only financial change for queer couples. There are new rules for RRSPs, spousal support, pensions, social assistance and old age security.

Financial planner Scott Reeves and journalist Duane Booth recently launched a self-published book called Partners: A New Financial Reality For Gay Couples, designed to help queer couples negotiate the new financial rules.

“My clients didn’t have a lot of knowledge about the impact of the changes. They were aware that things had happened but didn’t know what it meant to them. I was also hearing from parents of gay and lesbian children who wondered how it would affect their children and how to structure their estates,” says Reeves.

Reeves refers to the sweeping changes made in 2000 to 68 federal statutes and in 1999 and 2000 to 67 provincial statutes following upon the heels of the M Versus H Supreme Court Of Canada decision that ruled that homo couples have financial responsibilities to each other.

Partners summarizes the stories of six Ontario couples addressing issues including moving in together, inheritance, support payments, child custody and investments.

“We wanted to present the book in the way that any of the readers could relate to. We created characters that were very real, and presented situations that gay couples face. They are real and representative of people in our community,” says Booth.

While joint filing was optional for same-sex couples in 2000 and 2001, Reeves explains that, “there is now an expectation that [couples] should be filing taxes jointly if they are living in a conjugal relationship.”

This means a potential decrease in tax refunds for many individuals in cases where one partner has a much higher income. An individual on disability or social assistance will now have to claim their partner’s income, which will limit or reduce their refund, as well as eligibility for GST.

While the federal government won’t report the new income level to the province, “if you lie there are repercussions,” Reeves says. A same-sex couple is considered common-law in Ontario after three years of living together, thereby affecting provincial benefits.

Reeves says there is a double issue for parents. Living in a same-sex relationship this year means no longer being able to get a tax credit by claiming a child as “equivalent to married,” a loss of nearly $6,000 in credits. Additionally, an ex-partner who has been paying support can now ask for a revision of the support order due to the new combined income of the same-sex couple.

“I think it’s worse for women than men on an overall situation, though not all cases,” Reeves says. “Female incomes even in similar jobs tend to be lower and they tend to take advantage of the credits more.”

On the upside, a high-income partner can pay into a spousal RRSP, helping to reduce his or her own tax burden.

“Anything that brings equality is good,” says Reeves. “Anything that entrenches in law equal rights is a good thing. However, some people may have to change the way they have traditionally done things or structured their relationships. It is harder to get out of relationships now which may change the way people look at their own relationships now and their ability to get in them or stay in them.”

* Partners is available at queer bookstores, Amazon.com or directly from the company at www.reevesfinancial.com.