As you have no doubt heard, the 2018 federal budget put some serious roadblocks in the way of paying family members dividends. These rules went into effect on January 1, 2018. I have said previously in my weekly tips that it is no longer possible to pay children dividends who are between the ages of 18 and 25, unless they are working full time in the business.
Today I am talking about the possibility of paying dividends to a spouse who is not active in the business. This is more difficult now. However, if your spouse previously worked full time in the business for a period of time that is 5 years in total, then you are able to pay dividends to this spouse forever, or at least until the rules change again.
Here is an example:
A married couple start a business, both work full time in this business for a period of 5 years or more and then they start a family. If one parent is now primarily occupied at home and one parent is primarily occupied in the business, it is still possible to pay dividends to both parents. The key issue is the 5 years of full time work. Talk to your own advisors but know that the 5 year rule might work for you.
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