Despite the Department of Finance changing the “income splitting” rules in 2018, there are no shortages of income splitting plans. Some of them take advantage of various provisions of the Income Tax Act while others are a little more complicated. The average business owner can become permanently trapped in the tax on split income (TOSI) legislation. Splitting income with family members to avoid the attribution rules using prescribed rate loans has become common, and can still work with the new TOSI rules. The TOSI rules do not apply to salaries to family members.

Key Takeaways:

• The new tax law makes it nearly impossible for the average business owner to navigate, which means a tax professional is highly recommended.
• It is very important that you keep the income from the PR Loan as passive income which then can be reported.
• Salaries paid to family members must prove that they are income producing and be sure to only make reasonable deductions.

“No matter what the Department of Finance dreams up to stop perceived mischief, income splitting plans will survive, especially if the affected parties feel targeted, attacked and their overall tax situation is not fair.”

Read more: https://www.moodysgartner.com/is-income-splitting-dead/