Income Sprinkling Measures Announced

By Bilal Kathrada


(December 13, 2017– Today, the Federal Minister of Finance announced further details regarding the controversial income sprinkling measures originally announced on July 18, 2017. The changes are proposed to be effective for the 2018 and subsequent taxation years.


The government is continuing with the extension of the tax on split income (“TOSI”) rules subject to certain exclusions. Family members who receive dividends from a private corporation but who do not contribute to the business will be subject to TOSI and their income will be subject to a top flat-rate of personal tax.


Today, the government announced certain exclusions:
  1. Reasonableness test – Adults aged 25 or over will be subject to TOSI to the extent that the amount they receive exceeds a “reasonable return”. This vague phrase would require an analysis of labour contributions, capital contributions, risks assumed, etc.
  2. TOSI will not apply to amounts received by adults aged 25 or over who own 10% or more of a corporation (other than a professional corporation or a corporation that earns less than 90% of its income from the provision of services).
  3. TOSI will not  apply to amounts received by adults aged 18 or over who make or have made a substantial contribution to the business during any previous five years. The Department of Finance has suggested an average of 20 hours per week would be considered substantial.
  4. TOSI will not apply to amounts received by a business owner’s spouse, provided that the owner meaningfully contributed to the business and is 65 or older.


We will keep you aware of further changes as more information is released.


If you have any questions about how this impacts you or your business, please call us at 604.639.0909 or email