Under the new rules, you are still allowed to income split with a family member as long as the family member has a legitimate stake in the business either through ownership of shares or the number of hours that the family member works in the business. Specifically, the family member with whom you wish to income split must fulfill one of these conditions:
- Be over the age of 18 and work at least 20 hours a week in the year in which you want to income split or in 5 non-cumulative preceding years.
- Be over the age of 25 and own more than 10% of the votes and value of the shares of the corporation directly (not through a trust) where the corporation sells goods not services and where the corporation is not a professional corporation.
- Be over the age of 25 and the income represents a reasonable return on his/her investment.
- Be over the age of 65.
The higher income spouse can split up to 50% of their pension income with a lower earning spouse if it is withdrawn after the age of 65 from an employer sponsored pension plan or a registered retirement income fund (RRIF).
Yes, a higher earning spouse can transfer income to his lower earning spouse’s RRSP so that both can pay taxes at a lower marginal tax rate.
Yes, you are allowed to loan money to a lower income spouse at a rate of 2%. The interest on the loan must be paid by the lower income earning spouse to the higher income earning spouse by January 30 each year on the prior year’s income. This offers both spouses a means of paying taxes at a lower marginal tax rate.
Yes, you can set up a trust fund for your child, as long as he/she is under 18 years of age. The money loaned to the trust is payable at the prescribed rate of 1% interest. While the capital gains earned inside of the trust fund is non-taxable, the dividends and interest are taxable.
