With all of the recent proposed changes to the taxation of
private corporations in Canada, it's hard for many to believe
that there are still strategies available in 2018 to split income
amongst family members. But there are. And the best time to
implement one of these strategies – prescribed rate loan
planning - is now, as the benefit to this type of planning will be
reduced as of April 1, 2018.
Prescribed rate loan planning is a simple and effective strategy
that allows high-income earners to split income with their family
members who earn no, little or even less income, including spouses,
children, grandchildren, more remote issue, parents and even minor
nephews and nieces. The strategy involves a loan of money or assets
by the high-income earning individual directly to one or more
family members facing lower tax rates or, more commonly, to a trust
established for the benefit of such family members. Where in-kind
property is transferred, consideration must be given
