1. Are You Splitting Your Business Income?

You may pay reasonable salaries to spouse or children through your incorporated or unincorporated business. If you are not doing so, you may be missing out on some real tax savings.

In Canadian Federal Budget of February 16, 1999, measures were introduced to discourage income splitting with minor children through family trusts. However, these measures do not apply to paying reasonable wages to family members. Thus, this may be one of last ways of legally splitting income left for small business person with minor children. Obviously, amounts paid must bear some relationship to work performed. Of course, all required payroll taxes should be remitted and proper records need to be maintained.

Why not rearrange your affairs so that family members with little or no income can perform duties for and be paid by your business? Then, they can contribute out of their own income towards operation of household. In this way, little or no tax will be paid by your dependants and you will have successfully shifted taxable income out of your hands.

2. Should You Register For The Goods And Services Tax?

Even if your business grosses less than $30,000.00 per year in taxable sales, you may still benefit by registering your business to collect Goods and Services Tax (G.S.T.). If you are not doing so, you may be missing out on some real tax savings.

For example, you will be paying G.S.T. on many of your business expenses. If not registered for G.S.T., you must absorb this cost. If registered, you may deduct G.S.T. paid on such business expenses (input tax credits) from tax collected. Many business persons expect to pay G.S.T. and it doesn't really cost them anything since they deduct such amounts as input tax credits from G.S.T. they collect from their customers.