You need a good CCPC accountant.

Investment income taxation
When [passive] investment income is taxed on a corporate level [at the higher rate] and subsequently paid out as shareholder dividends, a certain amount of [higher] corporate tax is refunded to the corporation. For example, there is a $1 corporate tax refund when you pay $2.61 of taxable dividends [in such situations]. This is commonly known as Refundable Dividends Tax on Hand (RDTOH).

Refundable Dividends Tax on Hand
RDTOH is a notional account that is increased when a CCPC pays corporate tax on its investment income (e.g. taxable capital gains, interest, rents, etc.) and any dividends from unconnected Canadian corporations. 30.67% of the investment income and [all of] the Part IV tax payable by the recipient corporation of the dividend income are added to the RDTOH account. …

It simply represents a prepayment of an estimated amount of personal tax at the corporate level. This exists to eliminate any tax deferral opportunity for investment income and integrate the system when the money flows to the shareholder personally.

The earlier the corporation pays out the passive investment income as dividends, the earlier the corporation receives that RDTOH refund.

I would advise though that what you need is someone who specializes in "retirement INCOME planning". There are tons who know all about retirement planning from the savings point of view but fewer who understand the income side well.
I would think though that in a city full of retirees there must be someone!

I first ran into this concept in a book by Daryl Diamond, who was talking about it with reference to RSP or RIF withdrawals, but I think the same principle applies. He is or was in Winnipeg. I think he has or had a company focusing on retirement income planning but don't know the name of it.

My advice would be that if it is difficult to explain this idea to the accountant, then that's not the person for you. You want someone who "gets it" or wants to learn, not someone who just plays one old tune.

However, some people have found that they're better off to do this sort of thing all in one year. It's a huge tax bill, of course, but then you are done with it and can invest what you net out of it for better returns over the coming years and there is nothing for your kids to have to clean up.

I can't say whether this is a good idea for you or not; it would require some careful calculations.

Tax factors to consider in this regard would be: loss of Age Amount for only one year (but you might already be losing all or most of it, depending on current income); total tax payable by doing it this way as opposed to dribbling it out over 12 years; OAS clawback is not infinite - it ends it has been entirely clawed back - around 140K (don't quote me as I can't remember it well; and it will depend on how much OAS you are actually receiving, which in turn depends on when you ben receiving it and whether you are 75 or older). If the amount you still have to take out from the business is significantly more than that amount, then it could cost you less to take it all out at once than having the clawback on the withdrawal every year. Add in the additional income you could earn on it outside the business minus any tax implications from that. It's a complicated calculation but could be worthwhile. It might be helpful to consult an accountant or CFP, especially if you already have one.

re: that clawback maximum: if, for example, cashing out all the business money would bring you to income of 200K, the clawback would end at 140K (if that's the right amount for you), and the other 60K would not create a further clawback because your OAS will have been entirely clawed back at 140k or so. But if you took it out bit by bit annually, it would all be subject to clawback up to 140k or so. I hope that makes sense considering my vagueness about numbers. You also have to consider the marginal rate for amount up to 200K, i.e. whether it increases.

Cash that needs to go out in several months’ time goes into Questrade’s Corporate account and is used to buy ZST.L (ultrashort bonds ETF). Not cash but close. Yields between 4 and 5% but its all automatically reinvested. Likely to have capital gains too (which are not as heavily taxed). A lot of discount bonds right now… But that will change.

If you have over $100,000 CAD what is the best place to park the funds and earn interest? The time frame the business would like to access the funds would be 60 days just in case the business needs the funds right away.

The business currently has the primary account with RBC earning no interest.

RetirEd said
Thanks, Norman1. I remember the feds trying to stop the practise, but not them actually doing anything about it because of the howls of protest from small businesses.

The high corporate taxes on passive income in a corporation has been there for at least 20 years. I found that way back.

There were howls from small businesses. But, the government proceeded anyways with blocking maneuvers like income sprinkling. That's when income is split through earning income through a corporation that hires family member "employees" and pays generous deductible salaries for what they are supposedly hired for.

I assume that any funds in a corporation are a separate legal entity for potential grab on personal assets, in case...

Salaries are a business expense - thus no 50% passive income tax on the corporate level. Someone is doing the work of investing, deductions (tax only for >70Y), preparing the T5s ...

Upon death, assets will continue with the remaining, younger generation shareholders, if so structured...

Thus, preparations for the yearly tax return would have only "four" items: passive income with bank fees, salaries to employees, tax preparer fee, and restaurant shareholders meetings... .