Bill 88 2008

An Act to provide fairness for families by amending the Taxation Act, 2007 to allow income splitting for taxation between cohabiting spouses and common-law partners

Note: This Act amends the Taxation Act, 2007.  For the legislative history of the Act, see the Table of Consolidated Public Statutes – Detailed Legislative History on www.e-Laws.gov.on.ca.

Her Majesty, by and with the advice and consent of the Legislative Assembly of the Province of Ontario, enacts as follows:

   1.  Subsection 1 (1) of the Taxation Act, 2007 is amended by adding the following definitions:

"cohabiting spouse or common-law partner" has the same meaning as in section 122.6 of the Federal Act; ("conjoint ou conjoint de fait visé")

"individual taxpayer ratio" means, in respect of an individual who has filed a joint election described in section 4.1 for any part of a taxation year, the ratio of the part of the year during which the individual was not a cohabiting spouse or common-law partner to the whole of the year; ("coefficient de déclaration individuelle")

"joint taxpayer ratio" means, in respect of an individual who has filed a joint election described in section 4.1 for any part of a taxation year, the ratio of the part of the year for which the individual and the individual's spouse or common-law partner filed the election to the whole of the year; ("coefficient de déclaration conjointe")

   2.  Subsection 4 (3) of the Act is repealed and the following substituted:

Tax payable

   (3)  The tax payable under this Part for a taxation year by an individual who has not filed a joint election described in section 4.1 for any part of the year is the sum of,

  (a)  the individual's tax payable under Division B for the year; and

  (b)  the individual's tax payable under Division C for the year.

Same, joint return

   (4)  The tax payable under this Part for a taxation year by an individual who has filed a joint election described in section 4.1 for any part of the year is the sum of,

  (a)  the individual's tax payable under Divisions B and C for the year multiplied by the individual taxpayer ratio; and

  (b)  the tax payable under Divisions B and C for the year on a joint return described in section 4.1 multiplied by the joint taxpayer ratio.

   3.  Division A of Part II of the Act is amended by adding the following section:

Election for joint return

   4.1  (1)  An individual and the individual's spouse or common-law partner who are both resident in Canada for the whole of a taxation year may jointly elect to file a joint return under section 111 for the part of the year during which they were cohabiting spouses or common-law partners of each other, instead of each being required to file an individual return under that section.

Joint election

   (2)  To make the election described in subsection (1), the individual and the individual's spouse or common-law partner shall file a joint election in the form prescribed by the Minister of Finance in the joint return, providing details about the number of days during the year during which the individual and the individual's spouse or common-law partner were cohabiting spouses or common-law partners of each other.

False declaration

   (3)  A joint election filed under subsection (2) is invalid if the Minister establishes that any individual has knowingly or under circumstances amounting to gross negligence made a false declaration in the election.

Tax payable

   (4)  The tax payable under Divisions B and C for the year on a joint return described in subsection (1) shall be the tax payable under those Divisions by reading,

  (a)  references to an individual as references to both the individual and the individual's spouse or common-law partner;

  (b)  references to the individual's tax base and taxable income for the taxation year as references to one-half of the aggregate of the taxable income of the individual and the individual's spouse or common-law partner for the year; and

   (c)  references to the individual's income for the taxation year as references to one-half of the aggregate of the income of the individual and the individual's spouse or common-law partner for the year.

   4.  Subsection 9 (3) of the Act is amended by striking out the portion before the formula and substituting the following:

Tax credit for spouse or common-law partner

   (3)  If an individual is entitled to a deduction under paragraph 118 (1) (a) of the Federal Act for a taxation year and if the individual and the individual's spouse or common-law partner have not filed a joint election described in section 4.1 for the year, the individual is entitled to a tax credit for the year for a spouse or common-law partner calculated using the formula,

.     .     .     .     .

Commencement

   5.  This Act comes into force on the day it receives Royal Assent.

Short title

   6.  The short title of this Act is the Fairness for Families Act, 2008.

EXPLANATORY NOTE

The Bill amends the Taxation Act, 2007 to allow individuals who are married or who have a common-law partner in a taxation year that ends on or after December 31, 2009 to file a joint income tax return with their spouse or common-law partner for the part of the year during which they cohabit with their spouse or common-law partner. To file a joint income tax return in that way, both individuals are required to file a joint election to that effect in the joint income tax return.