Payroll & Benefits Umbrella Paie et Avantages Sociaux

Payroll as a Tax Planning Function

For owner-managers of private corporations, the payroll function is inseparable from the corporate and personal tax planning functions. The decision of how much salary versus dividends to draw from the corporation, how to structure shareholder loans, and how to utilize the corporation's eligible remuneration for RRSP contribution room purposes are all tax planning decisions that happen to manifest as payroll transactions.

The Salary vs. Dividend Decision

The conventional wisdom that salary and dividends are tax-equivalent for a Canadian private corporation owner — the integration theory — is approximately correct in a theoretical sense but imperfect in practice. The actual optimal mix depends on the corporation's provincial tax rate, the shareholder's personal marginal rate, the shareholder's RRSP room objectives, and the corporation's access to the small business deduction. St. Lawrence Gate calculates the optimal mix annually for each shareholder.

Group Benefits for Family Enterprises

A properly structured group benefits plan for a private corporation can provide tax-deductible benefits to owner-managers and key employees that are received on a tax-free or tax-advantaged basis. Health and dental benefits, life insurance, disability insurance, and critical illness coverage can all be structured through the corporation in a manner that delivers better after-tax economics than individual coverage purchased personally.