After months of battering from the business and tax communities about the July 18th tax proposals, Finance Minister Morneau tabled some revisions to the Tax On Split Income (TOSI) rules on December 13th, 2017, just before Parliament rose for its winter break, and just in time for him to avoid having to answer questions in Question Period.
In tabling his revisions, Morneau said, in part:
The Government is taking steps to limit the ability of owners of private corporations to lower their personal income taxes by sprinkling their income to family members who do not really contribute to the business.
Following extensive consultations with small business owners, professionals and experts, the Government is taking steps to make the tax system more fair with simplified measures that are easy to understand and implement.
Today, the Government published details of its proposals to simplify and improve the treatment of income sprinkling, which are proposed to be in effect for the 2018 tax year and beyond.
Moodys Gartner LLP have been in the forefront of the tax profession’s fight for fair tax provisions. Kenneth Keung, Director of their Canadian Tax Advisory Services, has prepared a flow chart to show how the new TOSI rules will operate, and to show just how simple they will now be. With their kind permission, I am reproducing that “simple” flow chart.