Tax fairness for all families

In a nutshell

Inconsistencies in tax treatment disproportionately affect women, children and youth in Canada. The CBA’s Family Law Section and Women’s Law Forum have recommendations to address these disparities and align tax policies with principles of gender equality and the evolving needs of Canadian families.

Outdated terminology

The CRA should revise its terminology, specifically replacing the outdated term “custody” with “parenting time,” as updated in the Divorce Act and other legislation.

The CRA should also update its definition of “shared custody parent” to better reflect children’s time with parents on an annual basis, rather than monthly, to align it with the Divorce Act and provincial family law legislation. “This discrepancy can affect the benefits available to children and complicate family budgeting,” the CBA letter says.

Inequity for common-law partners

Currently, separated spouses who are not married but meet the definition of a common law partner are eligible for a tax-free rollover of corporate interest within three months of separation, whereas married spouses have up to the date of their divorce. “This distinction is unfair and a significant impediment to common law spouses who have separated as it would be rare to be in a position to have the terms of their property division finalized within three months of separation,” the letter reads. The three-month period should be extended up to five years post-separation.

Eligible Dependent Credit

CBA members have seen an increase in disputes over the CRA’s restrictive interpretation of the Eligible Dependent Credit, especially in cases where parents share parenting time. The Sections recommend that in situations where there is shared parenting of two or more children, “each parent can claim the EDC for one child.”

Deductibility of legal fees

Legal fees should be deductible for all family law matters, not just recipients of support. “This change would make legal representation more accessible and align with the federal government’s commitment to supporting victims of violence and coercive control, and access to justice for all families,” the letter reads.

Simplifying access to income information

And finally, the CRA should streamline the process of access income information, including adding instructions and guides to relevant documents in plain language.

Read the submission.