Can I still pay my spouse dividends?

Only inside an exception: 20-hour involvement, qualifying excluded shares (not professional corps), or once you are 65. Outside those, TOSI applies the top rate — screen first, pay second.

How does the prescribed-rate loan escape TOSI?

The family member isn’t receiving split dividends — they’re earning ordinary investment income on money they borrowed at the legislated rate. The rules simply don’t reach it, provided the interest is actually paid on time.

What rate applies to the loan?

The CRA prescribed rate in the quarter you make the loan, locked for its life. When rates drop, refinancing means a genuine new loan — repay first, document everything.

TOSI Screener + Prescribed-Rate Loan

Which family-income exceptions actually survive TOSI — and what a prescribed-rate loan saves on your numbers.

★ CHAPTER BRIEF

Since 2018, TOSI taxes most family dividends at the top rate — unless an exception survives: the excluded business (≈20 hours/week of real work), excluded shares (10% votes-and-value, generally unavailable to professional corps), or the age-65 spousal opening. The structure that still works cleanly for many families is the prescribed-rate loan — Michael’s $500,000 move.

The screener walks the exceptions in the order the rules test them. Be honest with the hours: the CRA audits “regular, continuous, substantial” with timesheets in hand, and a professional corporation closes the excluded-shares door regardless of share structure.

The loan sidesteps TOSI entirely because the family member earns investment income on loaned capital rather than receiving dividends. Lock the prescribed rate at inception, pay the interest by January 30 every year without exception, and the spread between portfolio return and prescribed rate is taxed at the family member’s low rate — year after year.

★ KEY POINT

Salary was never TOSI: paying a family member a reasonable wage for genuine work remains fully available at any age — Sarah’s daughter on payroll is the book’s simplest splitting story.

⚠ WARNING

One missed January 30 interest payment taints the prescribed-rate loan permanently — attribution applies for its remaining life. Automate the payment, document the transfer, and keep the borrower’s investment account separate.

TOSI screener — the family member receiving dividends

Recipient’s age45

Their average hours/week in the business5

≈20+ hours (this year or any five prior) = the excluded-business exception.

They own ≥10% of votes AND value

The corporation is a professional corporation

Excluded shares are generally unavailable to professional corps.

Principal owner’s age52

At 65, broad spousal splitting opens.

Recipient is the owner’s spouse

Screen result

TOSI applies — top-rate tax on split dividends

No exception on these facts. The prescribed-rate loan below sidesteps TOSI entirely because the income is earned on loaned capital, not received as dividends.

Screening only — TOSI turns on facts the CRA tests carefully (documented hours, share attributes, income sources). Confirm with your CPA before paying a family dividend.

Prescribed-rate loan — the TOSI-free route

Loan amount

Michael’s example: $500,000.

Expected portfolio return6%

Your (lender) marginal rate54%

Family member’s (borrower) rate20%

Years10

Annual family tax saving

$3,348$33,480 over 10 years

Lend $500,000 to your lower-income spouse (or a family trust) at the prescribed rate of 4%, locked in for the life of the loan. The portfolio earns 6%; the $10,000 spread above the interest is taxed at 20.05% instead of your 53.53% — saving the family about $3,348 every year ($33,480 over 10 years), TOSI-free, because the income is earned on loaned capital. ⚠ The whole structure hangs on one date: interest of $20,000 must actually be paid by January 30 each year. Miss it once and attribution applies for the life of the loan.

Metric	Amount
Loan at prescribed rate	$500,000 @ 4%
Interest due each Jan 30	$20,000
Income shifted to lower rate	$10,000
Rate differential captured	33.48%

Figures as of July 2026 · Ontario basis · Educational illustration, not advice — confirm current rates with your CPA.

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Questions to ask your advisor

Ask your CPA

Which family members could defensibly meet the 20-hour excluded-business test — and how do we document it?

Ask your CPA

Set up the loan: note, transfer, separate account, and the Jan 30 payment calendar — who owns each piece?

Ask your Tax counsel

Do my share classes and my profession’s rules leave any excluded-shares room at all?

Continue in book order

From Chapters 3 & 14Salary vs Dividend Mix Optimizer From Chapter 16Estate Freeze Estimator

Educational illustration, not advice. This tool is provided for educational purposes only and does not constitute financial, tax, legal, accounting, or insurance advice. Results are estimates, not promises — hypothetical illustrations are projections only. Figures use Ontario rates as of the date stamped above; rates and limits change. Confirm current figures and your specific situation with a CPA, tax lawyer, and licensed insurance advisor before acting.