The article looks at how business owners can decide between salary and dividends when paying themselves from their corporation, weighing today's cash needs against long-term tax efficiency.
Kyle Westhaver, Wealth Advisor and Client Relationship Manager at Nicola Wealth, notes that one of the simplest ways to add value for clients is limiting personal withdrawals to what's genuinely needed for lifestyle spending, since money extracted personally is taxed at roughly 50 to 53.5%, while capital retained inside the corporation is taxed at just 11.2 to 26.5% in Ontario. He adds that salary and dividends are largely equivalent on paper once tax integration is accounted for, but the ideal structure still hinges on a client's specific circumstances, and he builds each recommendation around the after-tax income required for personal expenses alongside the salary needed to maximize CPP/QPP and RRSP contribution room.
