Prior to 1993, the definition of "spouse" in the Income Tax Act ("the Act") was straight-forward. If two people were married, then they were spouses of one another. As spouses, they benefited in the following areas:

• The ability to claim the "married" credit if one spouse had income below a threshold amount
• The ability to contribute to a spousal RRSP and thus income split in the future
• The ability to transfer capital assets at adjusted cost base from one to another
• The ability to deduct periodic support payments made pursuant to a court order or written agreement

The disadvantages of marriage (for income tax purposes, at least) include:

• The requirement to combine both spouses’ income for the purpose of determining eligibility for the GST Credit, Ontario Tax Credits, and the Child Tax Benefit.
• The inability to claim any other dependant for the Equivalent-to-Married Exemption.

In 1993, the definition of spouse was broadened to include common-law relationships longer than 12 months, and those where the parties were the parents of the same child. As a result, periodic support paid to a common-law spouse or former common-law spouse pursuant to a written agreement was now deductible to the payor and taxable to the recipient.

Despite recognition of common-law relationships as modern day equivalents to marriages in certain respects, the Act specifically indicates that in order to qualify for the broadened definition of spouse, the two parties must be of the opposite sex. Once again, same-sex couples were not permitted spousal treatment.

Notwithstanding the Act’s disregard for same-sex couples, many corporations offer employer benefit packages that include coverage for same-sex partners. According to Revenue Canada’s Interpretation Bulletin on the subject, employer contributions to an employee’s private health plan are excluded from employment income if coverage is for the employee, employee’s spouse, and a member of the employee’s household, with whom the employee is related by blood, marriage, or adoption. Accordingly, a same-sex partner is excluded, and employers who offer benefit coverage for same-sex spouses must include a taxable benefit on the T4 slip of the employee for the value of the benefits accorded the same-sex partner.

In September 1996, Revenue Canada issued a statement advising that for the purposes of extending benefits to same-sex couples, the same-sex partner will be treated as a spouse. Accordingly, there will be no taxable benefit on the coverage provided to the same-sex partner. Just as for common-law spouses, the couple must have co-habited in a conjugal relationship for at least 12 months in order to qualify.

Ready or not, it may be that Revenue Canada and the Department of Finance are testing the waters of public reaction to extending same-sex benefits for all income tax matters. And as we have seen in the past, where the Income Tax Act treads, the Family Law Act is not far behind (or ahead!).