Roommates and common law – The law explained

NOTE:  The article below is for common law marriages for the purpose of paying taxes to the CRA.  Therefore, it maybe possible that one couple may be considered common law in the eyes of the CRA but single in the books of family law.

The government here in Canada has laws stating what is a common-law marriage.  I find this very hard to swallow.

If you are living with another person for twelve consecutive months or more, and you are having a conjugal (sexual) relationship, you are considered common-law unless you can prove otherwise.

NOTE: The CRA has added a new rule as of April 30, 2010. Please see http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/prsnl-nf/mrtl-eng.html for the proposed changes.

Couples have been known to be in a non-sexual relationship, therefore, other criteria will be used if necessary.  The CRA may not audit you unless you have a child with the other person.

In some cases, they may decide to audit you after living with your roommate for five years or more.  Therefore, it is in Revenue Canada’s best interest to declare you and your roommate common law if there is a chance that one roommate may go on social assistance, or if a roommate is on social assistance.  You can read the articles roommate sues for half of property, and roommate claims common law.   If there is a child involved, the amount of money a roommate will collect from the government can be much less if the roommates are considered common law.  For example, if your roommate is making no money and she/he takes custody of the child, he/she can collect $327.66/month in child tax benefit.  If you and your roommate are married, and you are making $40 000/year, the couple will collect about $50 in child tax benefit.  If you fight it, they will come in and do an audit.  Therefore, roommates can become your worst nightmare.

What does the CRA look for?  This forum post will tell you what the judge will look for.

As for me, I believe that they will look at:

  • rent.  Do both parties pay rent or does one not work.  Furthermore, is there receipts that prove that this is indeed a roommate relationship.
  • children.  If one roommate has a baby while living with another roommate, the CRA will most likely assume the other roommate is the parent.
  • who is the beneficiary on your life insurance documents and other stuff
  • car insurance papers to see if there is both names are on it
  • how the couple acts, and what the neighbors views are of the couple
  • where they are sleeping.  Do they sleep in the same room and/or bed or separate rooms
  • attitude towards each other.  It is obvious if you called the other person “pookie”, “honey”, or “sweety”.

In some cases, a roommate will declare common law marriage, if the other tries to kick him/her out.  This can be a problem.  If it can be proven that this is indeed a common law relationship, he/she can sue for spousal support which is two times the length of the common law marriage.  Therefore, if it is found that the common law marriage lasted for three years, the spousal support payments will have to be paid to the other person for six years.  This can vary depending on the courts.  Furthermore, I believe that spousal support claims from common law partners must be filed before one year from date of divorce otherwise spousal support claims may be rejected.

NOTE:  Family law, which is different from income tax law, in BC dictates that roommates do not automatically become common law after a specified time.  This can be found at http://www.bcfamilylawresource.com/09/0900body.htm under accidental spouse.

If a divorce happens, a person will have to make a decision.  Should he/she stay and be miserable with the spouse or deal with the possible headache of a roommate suing for spousal support.

The laws in Canada can be a nightmare.

If you are looking into marriage as a way of saving money on taxes.  This post may help in the decision making process.  You can read the post at http://aprivatebeach.com/blog/2008/10/income-splitting-marriage-and-children/.  The amount of taxes you will save depends on your incomes, furthermore, there are other factors to look at also.

As of July 2010, BC made some changes regarding common law.  It seems that common law is within federal jurisdiction for income tax purposes and provincially for family purposes.  Therefore, every province maybe different when dealing with common law in divorce situations.

http://family.findlaw.ca/article/a-primer-on-common-law-marriage-rights-in-canada/

6 thoughts on “Roommates and common law – The law explained”

  1. That would depend.

    In most cases, the CRA is more interested in business tax fraud than marriage fraud. It seems that businesses gets audited alot more than non-businesses.

    If you have a child with that person and/or someone tells the CRA that you are living common law, they may come to your door.

    The CRA, from what I understand, audits most non-business people based on abnormalities in filed taxes and tips from jealous neighbors. The rest of the audits can be random.

    Therefore, The CRA may decide to audit you at random, but the chance of you being audited is very slim. There are probably millions of couples living together as roommates, and probably less than 0.1% of them have been audited.

    If you do, by chance, get audited, I will be worried.
    Based on the information provided at http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/prsnl-nf/mrtl-eng.html, you are considered common-law if your partner
    a) has been living with you in a conjugal (sexual) relationship for at least 12 continuous months;

    I do not think that the CRA cares if this is a benefit. If one of you admits that there was indeed a conjugal relationship, it could get complicated.

    As for the CRA showing up in your bedroom, probably not. If you file your taxes properly and do not give them any reason to doubt the expenses, you should be fine. Unless your roommate and/or a neighbor decides to make your life miserable, he/she can call the CRA and file a complaint triggering an audit.

    Hope that helps,

    David

  2. A question.

    I am in a “roommates with benefits” situation that is not anticipated to be very long term, and which is not based on the expectation of future separation of property – he has his stuff, I have mine, all my insurance has my adult son as beneficiary, etc.

    This temporary relationship has lasted longer than some considered to be permanent, perhaps, at 5 years. But the door is still open. There is a significant age difference and we take each day as it arrives.

    We have not combined our money in any way except through shared expenses. Do we really have to be considered “common law”?

    I thought that the reason there was such pressure to have “common law” relationships recognized was due to tax benefits (and coverage for dependent children). If we do not take these, would the CRA really show up in our bedroom?

Leave a Reply