Income from business

HespelerRick wrote: ↑ My wife and I are starting a new small business in publishing. I'll be doing the majority of the work, but we're hoping to give her the majority of the income from it. Is this doable?

Sure, until you get audited...

If things get out of whack to the point that the CRA thinks you’re income splitting, they can chose to “rebalance” things and penalize you for it. Up to you to decide if you’re at risk and whether it’s worth it.

For example, as an IT contractor, I can’t pay a spouse half my income if she’s not doing any relevant work for me. I can pay her to do my books, up to what would be reasonable to pay an actual accountant.

C

HespelerRick wrote: ↑ My wife and I are starting a new small business in publishing. I'll be doing the majority of the work, but we're hoping to give her the majority of the income from it. Is this doable?

Can only pay her for the work she does - must be equal to what you'd pay a 3rd party to do the same work.

Dividends - unless you need the RRSP contribution room, CPP etc. You can pay whoever you want as much or as little as you want by issuing the right ratio of shares.

torontotim wrote: ↑ Dividends - unless you need the RRSP contribution room, CPP etc. You can pay whoever you want as much or as little as you want by issuing the right ratio of shares.

True, but the OP has not stated that they are or will be incorporating and if they do then any dividends paid out of income taxed at the small business rate is are ineligible dividends and do not enjoy the favoured tax treatment. By the OP's first post it looks like they are trying to take advantage of the wife's lower tax bracket. Even at the higher tax rate on ineligible dividends it would still make sense paying her the majority of the dividends by having her own the majority of the share class that pays them.

So the next question is: How stable is your marriage?