Does your family's income splitting plan comply with new rules?
As the owner of a private corporation, you and your family members may be subject to the tax on split income (TOSI) rules. These restrictive new rules are complicated, and can apply when receiving amounts such as dividends or interest from a private corporation, or certain capital gains from the disposition of shares or debts of a private corporation or an interest in a partnership or trust. The new rules, which became effective at the beginning of 2018, may apply to certain income distributed to your spouse or child who is 18 or older at the end of the year, which can be as high as 54 percent, depending on the province of an individual's residence. Previously, these rules only applied to certain income splitting with children under 18.
Despite this change, there are several exceptions where you can still accomplish income splitting in a tax-efficient manner. For example, this tax does not apply to salary or wages you earn if you work for the business, and to amounts you receive if you have made a significant contribution to, or investment in, the business, according to several tests that are included in these rules. If your have an income splitting plan with your family, it's important that you consider these new rules and explore the different exemptions that may be available so you can assess and mitigate the impact of these changes.
To help you get acquainted with these new rules, KPMG presents "Tax on Split Income", the first webinar in KPMG's new Enterprise Tax on Demand series. This webinar focuses on how to determine whether you are affected by these income splitting changes, and looks at next steps you can take to manage the changes. Other upcoming short and specific Enterprise Tax on Demand webinars will focus on other important tax-related areas of your business, including the Lifetime Capital Gains Exemption, Scientific Research and Experimental Development (SR&ED) and structuring a business.
To learn more about how Tax on Split Income impacts you, please contact Dino Infanti or visit our website KPMG private company tax to learn more.
Information is current to December 18, 2018. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500
© 2020 KPMG LLP, an Ontario limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
For more detail about the structure of the KPMG global organization please visit https://home.kpmg/governance.