Tax benefits for same-sex civil unions
Personal fiscal matters by their nature must keep in step with developments in the laws affecting people's personal affairs, including the laws governing domestic relationships. As early as 2001, the definition of "spouse" in the Income Tax Act was somewhat liberalised when it was amended to be held to mean in relation to any person, a person who is the partner of such person in a marriage or customary union recognised in terms of the laws of the RSA, in a union recognised as a marriage in accordance with the tenets of any religion, or in a same-sex or heterosexual union which the Commissioner for the SA Revenue Service is satisfied is intended to be permanent.
The Commissioner has been partly relieved of the rather ignominious burden of having to be satisfied of a couple's intention to remain in a permanent union by the Civil Union Act which came into effect on November 30 2006. This essentially legalises same-sex civil partnerships and provides for the solemnisation of civil unions by way of either marriage or civil partnership.
All the invariable and variable consequences of marriage as contained in the SA common law and in various statutes now also apply to civil unions. For example, same-sex civil union partners can avail themselves of the exemptions and allowances given to spouses in terms of various of the SA income tax and revenue laws, such as:
1. The exemption from donations tax on donations to a spouse in terms of the provisions of section 56 of the Income Tax Act;
2. The exemption from estate duty on bequests by the deceased to their surviving spouse or the surviving spouse who inherits intestate in terms of the provisions of section 4(q) of the Estate Duty Act;
3. The exemption from the payment of transfer duty as contained in section 9(1)(i) of the Transfer Duty Act, in terms of which a surviving or divorced spouse who acquires sole ownership of all or any portion of property registered in the name of his/her deceased or divorced spouse where the property or portion is transferred to the surviving or divorced spouse as a result of the death of his/her spouse or dissolution of their marriage or union.
Currently none of the legal consequences of civil marriage ensue if a couple live together as life partners without formalising their relationship by means of a marriage in terms of the Marriage Act or a civil union in terms of the Civil Union Act. However, prior to enactment of the Civil Union Act, some of the rights and benefits of spouses married in terms of the Marriage Act were extended to same-sex life partners. The Insolvency Act includes an opposite-sex or heterosexual life partner in the definition of ‘spouse', as do other examples of fiscal legislation such as the Estate Duty Act, the Pension Funds Act and the Maintenance Act. These statutes extend the same protection to same-sex and opposite-sex life partners, treating both as spouses.
The law applicable to opposite-sex couples who do not formalise their relationship by means of a marriage or civil union is now anything but clear. The minister of Home Affairs accordingly released for comment the Draft Domestic Partnerships Bill. It seeks to enable opposite-sex couples to formalise their relationship by means of a registered partnership, but also accords some protection to unregistered domestic partnerships.
The draft Bill does not deal with tax issues but does govern the partnership property regime (out of community), maintenance issues and intestate succession by registered domestic partners. It provides that a reference to "spouse" in the Intestate Succession Act must be construed to include a registered domestic partner and possibly the same considerations would apply to taxing statutes such as the Estate Duty and Transfer Duty Acts. Presumably both registered and unregistered domestic partners will still have to prove to the Commissioner that they intend their relationship to be permanent to qualify as spouses in terms of the Income Tax Act.
A parliamentary contact said in early September 2008 that, in spite of several criticisms when the Bill was released for comment by February 15 2008, there has been no further draft released and it is unlikely that the Bill will be tabled in Parliament this year. It will be interesting to see if there are any further developments that affect the taxation of couples.
*Hilary Dudley is a senior manager with Maitland's trust & corporate services division in Durban.