In the case where there is a discrepancy between the earnings of a couple, some of the higher income can be shifted to the return of the lower earner so that the tax can be paid at a lower rate. This is especially advantageous for spousal RRSP’s and Pension income splitting. Seniors benefitted enormously from changes to the pension splitting rules made in 2007.
The Canadian government has not always been very generous in the ways that income could be split. Business owners could pay various members of their family rather than take on the full income. But it must be a justified income.
Small businesses and seniors, as well as families, should seek professional advice on income splitting. ATS can help you to find some unexpected tax savings.