10 Tax Blind Spots Many Canadian Business Owners Don’t Revisit Often Enough

Most business owners don’t ignore tax strategy.
They just assume it’s been “handled.”

A structure is set. An accountant is hired. Returns are filed.
And unless something breaks, the topic rarely comes back up.

The problem?
Businesses don’t stay still.

Revenue grows. Passive income builds. Risk changes. Family situations evolve.
And slowly, a structure that once made sense starts working against the business.

Tax inefficiency is rarely caused by bad advice.
It’s usually caused by infrequent review.

The points below aren’t advanced loopholes or aggressive tactics.
They’re structural checkpoints every Canadian business owner should revisit as the business matures.

1. Maximize the Small Business Deduction (SBD)

The small business deduction provides access to the lower corporate tax rate on the first $500,000 of active business income.

What often gets missed is how passive income inside the corporation can quietly grind this benefit down.

Without intentional planning, profitable businesses can lose access to the SBD simply because growth wasn’t structured properly.

2. Income Splitting (Still Possible; With Structure)

While TOSI (Tax on Split Income) rules tightened income splitting, it didn’t eliminate it.

Reasonable salaries, trust planning, and certain corporate structures can still allow income to be allocated efficiently within a family; when done correctly.

The key is documentation, purpose, and alignment with the business reality.

3. Move Passive Income Out of the Operating Company

When passive investments sit inside the operation company, they don’t just affect taxes, they affect risk.

Holding companies, exempt life insurance strategies, and TFSA planning can help:

• protect the operating business

• preserve access to the SBD

• create cleaner financial separation

This is less about optimization and more about business hygiene.

4. Use Corporate-Owned Life Insurance Strategically

When structured properly, corporate-owned life insurance can serve multiple roles:

• tax-advantaged growth

• asset protection

• capital dividend account (CDA) planning

• access to capital through collateral lending

It’s not for every business; but when it fits, it’s often underused.

5. Build a Tax-Efficient Retirement Structure

Many owners focus on retirement late and narrowly.

Integrated planning using IPPs, RCAs, RRSPs, and CPP optimization can:

• reduce taxes today

• strengthen long-term security

• align retirement with business cash flow

Retirement planning isn’t a personal afterthought, it’s a business decision.

6. Use a Holding Company for Asset Protection and Tax Flow

A HoldCo isn’t just for large corporations.

When used intentionally, it can:

• move excess profits out of the operating business

• reduce risk exposure

• prepare the business for succession or sale

The earlier this is considered, the more flexibility it provides.

7. Don’t Miss the Lifetime Capital Gains Exemption

Up to $1M+ in gains may be sheltered from tax, but only if the corporation qualifies.

Corporate purification and advance planning are often required years before a sale.

This exemption is powerful, but unforgiving if ignored too long.

8. Optimize Salary vs. Dividends Each Year

Compensation decisions affect:

• corporate tax

• personal tax

• CPP contributions

• cash flow stability

What worked last year may not be optimal this year.
This decision should be revisited, not automated.

9. Claim All Eligible Deductions (The Right Way)

PHSPs (Private Health Services Plan), home office expenses, vehicle costs, borrowing expenses, and insurance structures are often underutilized.

Tax efficiency isn’t a year-end fix, it’s a year-round strategy that supports better decisions throughout the year.

10. Treat Tax Strategy as a Business System, Not an Annual Task

Most owners think about tax planning:

• at year-end

• when their accountant asks

• or when cash feels tight

But strong businesses treat tax decisions as part of:

• cash flow planning

• compensation strategy

• investment decisions

• growth and exit readiness

The real question isn’t:
“How do I reduce taxes this year?”

It’s:
“Does my current structure support where this business is going?”

The Bigger Picture: Clarity Before Action

The real risk isn’t paying tax.
It’s making decisions with incomplete information.

Tax structure influences:

• how much cash you can safely reinvest

• how you pay yourself

• how exposed your assets are

• how prepared you are for growth, funding, or exit

When these decisions are made in isolation, businesses drift.
When they’re made with clarity, businesses compound.

If you’re facing an important decision or planning your next step, clarity comes first.

That’s where better business decisions begin.