Yes, you can pay your spouse a salary through your corporation, but the CRA has strict requirements: your spouse must perform genuine work, the salary must be reasonable for the duties performed, and you must have proper documentation and payroll records. This approach differs from dividend income splitting because salary payments must be defensible as legitimate business expenses, not simply income redistribution. When done correctly, paying a spouse a salary can be a powerful income-splitting tool that reduces your corporation's overall tax burden and keeps more money in your family's hands. When you own an incorporated business, your spouse can become an employee of that corporation. Unlike sole proprietorships, a corporation is a separate legal entity that can employ people (including family members) and pay them reasonable compensation. The key difference between salary and dividends matters significantly for tax planning: Salary payments are deducted as business expenses from the corporation's taxable income Your spouse reports the salary as employment income on their personal tax return The corporation gets a deduction, but your spouse pays tax at their marginal rate This works best when your spouse has lower income and can absorb salary in a lower tax bracket The Canada Revenue
Yes, part-time spouse salaries are acceptable as long as the compensation is reasonable for the hours worked and the duties performed. You must document the work with timesheets and job descriptions. The CRA's concern is whether the salary matches the actual work done, not whether it's full-time or part-time.
The CRA can reclassify the salary as a non-deductible personal expense or dividend distribution. This increases your corporation's taxable income and may trigger penalties and interest. Your spouse would still report the amount as income, but you lose the corporate deduction, creating double taxation.
No, you cannot process payroll without a valid SIN. Your spouse must apply for and obtain a SIN from Service Canada before you can pay them through payroll and issue a T4 slip.
Employment income may affect means-tested benefits like Canada Child Benefit, Goods and Services Tax Credit, or provincial benefits. Review your spouse's specific situation with a tax professional to understand whether additional income changes their eligibility.
There's no CRA-set minimum or maximum, but the salary must be reasonable for the work performed. The CRA will challenge amounts that seem arbitrary or disconnected from actual duties. Document the reasoning for your chosen salary level.