Canada: Steps Entrepreneurs Can Take Now To Minimize Tax Under The Justin Trudeau Government

While taking smart steps to minimize tax has always been important, early signs indicate that under the new federal Liberal government, proper planning is going to become even more critical.

This is particularly the case for entrepreneurs who may have complex personal finances, as well as the high incomes that have been the target of many of Justin Trudeau’s campaign messages. While it will be some time before Trudeau’s ideas start to come to fruition in the form of changes to the tax code, there are actions entrepreneurs can take now to maximize their wealth.

Take advantage of income splitting

Many entrepreneurs in Canada have reduced their family’s overall tax burden through income-splitting benefits that were introduced by the Harper government, known as the “Family Tax Cut.” Trudeau has talked at length about his position on the Family Tax Cut and his plans to eliminate it, saying it only benefits a few Canadians.   

As it is quite likely this tax-reduction mechanism will soon appear in the crosshairs of the new Liberal government, it may be wise for entrepreneurs who have not yet availed themselves of income-splitting strategies as fully as they can, to do so. Using other tax-planning techniques, income may be transferred to lower-income family members, such as a spouse, to reduce the household’s overall tax burden. Such planning, at least for the moment, does not appear to be a focus of the new government.

Defer personal income using a holding company or incorporating

The Liberals promised a new tax bracket of 33% for individuals earning more than $200,000 per year. This is up from the current top federal bracket of 29%, affecting individuals with taxable income over $138,586.

Tax Rates — Salaries

Province Salary
2016 2015 Increase*
  British Columbia 47.70% 45.80% 1.90%
  Alberta 48.00% 40.25% 7.75%
  Saskatchewan 48.00% 44.00% 4.00%
  Manitoba 50.40% 46.40% 4.00%
  Ontario 53.53% 49.53% 4.00%
  Quebec 53.31% 49.97% 3.34%
  New Brunswick 58.75% 54.75% 4.00%
  Nova Scotia 54.00% 50.00% 4.00%
  Prince Edward Island 51.37% 47.37% 4.00%
  Newfoundland 48.30% 43.30% 5.00%

*Potential tax savings if income accelerated into 2015

Entrepreneurs who might normally withdraw more than $200,000 each year as personal income might be wise to consider whether they really need that sum to live on. If their personal expenses can be kept under the $200,000 threshold, they might be wise to defer personally earning income above $200,000. In certain circumstances, this income could be left in a holding company to defer paying personal tax on it, using the provision that corporate dividends can generally be transferred from an operating company to a holding company tax-free.

Entrepreneurs who are not incorporated might want to take a closer look at taking that step, in light of the expected increase in taxes on personal income.

Consider what effect higher personal tax rates will have on finances

If an entrepreneur does require more personal income in the near term – maybe to pay for a new car or home renovation – it may be best for them to take that money out of their company in 2015, rather than in 2016. This means the income will be taxed at the 2015 tax rate for personal income, rather than what may be a higher rate after the new government implements the promised changes.

If there are ways to accelerate income into 2015 (or possibly defer expenses or deductions into 2016), it may be wise to do so, in light of the anticipated higher tax rates at the higher income brackets.

Realize capital gains sooner

As tax rates on capital gains are anticipated to increase in 2016, if you are planning to sell any investments in the short term, you may choose to sell them in 2015, rather than 2016, to benefit from the lower 2015 capital gain tax rates, as outlined in the following table. 

Tax Rates — Capital Gains


Capital Gains
2016 2015 Increase
  British Columbia 23.85% 22.90% 0.95%
  Alberta 24.00% 20.13% 3.88%
  Saskatchewan 24.00% 22.00% 2.00%
  Manitoba 25.20% 23.20% 2.00%
  Ontario 26.76% 24.77% 2.00%
  Quebec 26.65% 24.99% 1.67%
  New Brunswick 29.38% 27.38% 2.00%
  Nova Scotia 27.00% 25.00% 2.00%
  Prince Edward Island 25.69% 23.69% 2.00%
  Newfoundland 24.15% 21.65% 2.50%

Stock option claims may be capped

One of the Liberals’ election platform planks involved stock options being used as a form of employee compensation. While the party acknowledged the valuable role of stock options, particularly for start-ups, they pledged to cap the amount that can be claimed under stock option deductions. Specific measures have not been announced, but it is expected that employees with up to $100,000 in annual stock option gains would be unaffected by the cap. You may choose to accelerate the exercise of stock options in 2015, which may mitigate the effect of the new proposed cap. 

Document your actions, and seek professional advice

The Liberals have said they expect some taxpayers will use tax-planning strategies to minimize their tax exposure. Accordingly, they have promised to increase enforcement resources for the Canada Revenue Agency to ensure tax liabilities are collected.

Entrepreneurs should take extra care to document carefully any tax-planning strategies implemented. It is also extremely important to consult skilled and experienced professional tax advisors, who will point out alternatives to pursue, as well as how to mitigate potential issues. A good tax advisor will remain in tune with the signals and news bulletins provided by a range of sources and the expected changes in the tax legislation.

This allows entrepreneurs to focus on creating opportunities to enhance and grow their business and minimizes being sidetracked with a time-consuming challenge from the tax authorities.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.