Budget 2014 expanded the Kiddie Tax, making it more challenging
to split business income with minor children. The new rules apply
to the 2014 taxation year onward.
The background
Diverting income to relatives with lower or no income reduces
the overall family tax burden. But the Income Tax Act limits when
this is allowed through attribution rules, including the Kiddie
Tax.
Also known as the tax on split income, these rules tax income at
the highest federal tax rate (29%), even if a minor child or spouse
in a lower bracket earned it.
The type of split income targeted includes:
- taxable dividends and shareholder benefits on unlisted shares
of Canadian and foreign corporations (other than mutual fund
corporations), received directly or indirectly;
