Tax Planning Checklist for Small Business Owners

Written by David Oliveros | May 7, 2025 6:37:53 PM

Every year, we sit down with our owner‑managed businesses and run an in-depth tax planning session. We prep in advance, reviewing your books for opportunities, and in 30 focused minutes, we spot the big levers to save you tax today - and if/when you sell your business too.

By the end, our owners walk away with a one‑page action plan that shows exactly how many tax dollars can stay in their pocket.

We’ve written this guide so you can follow the same playbook on your own (or see what our controller service looks like behind the scenes) and start the year knowing every smart, legal move to cut tax and fuel growth.

Why Do Tax Planning ASAP?

More runway: You still have 11 months to change payroll, place equipment orders, or tweak sales‑tax elections.
Big policy shifts are live:
- The Lifetime Capital Gains Exemption (LCGE) jumped to $1.25 million for shares of a small‑business corporation sold on/after 24 June 2024.
- The new Canadian Entrepreneurs’ Incentive (CEI) starts phasing in 2025 and will cut the tax rate on up to $2 million of additional gains to one‑third.

Step 1: Grab these five QuickBooks (or Xero) reports — 15 minutes tops

Report	Where to find it	What you’ll spot
Year‑to‑Date Profit & Loss	Reports → “Profit & Loss YTD vs. Prior Year”	Will profit push past $500 k (where the low small‑biz tax ends)?
Balance Sheet – detail	Reports → “Balance Sheet Detail”	Cash cushion and any shareholder‑loan balance you owe back.
Capital‑asset list	Reports → “Transaction List by Account” → filter fixed‑asset accounts	Gear that’s aging and might qualify for the 100 % write‑off.
GST/HST filing history	CRA My Business portal	Is the Quick‑Method worth electing this year?
Payroll register	Payroll → “Payroll Summary”	How much salary you—and family members—already took in 2025.

Step 2: The Plain‑English Tax Strategy Checklist

Tick “Yes” if the question fits you, then jot the saving beside it.

Strategy	Ask Yourself	Where to look	How the saving works*
Keep the low small‑business rate (≈ 12 % vs ≈ 26 %)	“Will my profit top $500 k?”	P&L forecast	Every dollar over $500 k is taxed 14 % higher—so keeping $100 k below the cap saves about $14 k.
Salary + dividend blend	“Need a mortgage in 12–18 mo?”	Payroll register	Higher T4 income boosts borrowing power; dividends for the rest keep CPP costs down.
Book a December bonus, pay it by June	“Can part of my pay wait?”	Cash‑flow sheet	You deduct now, pay later → 26 % tax deferral for up to six months.
Immediate expensing on new gear	“Any must‑buy equipment?”	Capital‑asset list	A $50 k purchase knocks ≈ $13 k off this year’s tax at a 26 % rate.
Pay family for real work	“Does my spouse handle admin?”	Timesheets or calendar	Paying a spouse $40 k at a 20 % bracket instead of your 48 % saves $11 k in the household.
Clear a shareholder loan	“Have I taken advances?”	Balance sheet	Avoids a benefit taxed at your top personal rate.
Prep for a future sale (LCGE + CEI)	“Could I sell in 3‑5 yrs?”	Share register	LCGE saves 26 % on $1.25 M ⇢ ≈ $330 k. CEI (after 2025) can save another ≈ $180 k on the next $2 M.

*Savings use Ontario 2025 rates; adjust a point or two for other provinces.

Federal small‑biz vs. general rates: 9 % vs. 15 %, plus provincial add‑ons.

Step 3:  Picking Your Paycheque: Two Simple Tracks

Your priority	Best mix	Why it wins
Bigger mortgage or refinancing	Salary high enough to hit lender ratios; dividends for the rest.	Lenders average your last two T4s; salary also builds RRSP room.
Maximising after‑tax cash & personal investing	Salary up to the RRSP room you’ll actually use (e.g., $70 k salary → $12.6 k RRSP space); everything above that as dividends.	Dividends skip CPP/EI, leaving the CPP premiums in your pocket for TFSA/RRSP investing.

Rough comparison: a $ 10k dividend in Ontario carries about the same total tax as a $ 10k salary plus employer CPP—but no CPP means $1,100 stays with you.

Step 4: When “Spend‑to‑Save” Makes Sense

Pull the numbers below—if any line trips its trigger, consider reinvesting instead of drawing extra profit.

Check this	Trigger	Smart things to buy now
Profit forecast	> $475 k and rising	Extra marketing, automation software, employee training
Cash on hand	More than 3‑4 months of expenses	Equipment or vehicle you’ll need anyway (100 % write‑off)
Gear age	Most equipment > 5 yrs	Laptop refresh, kitchen refit, new tools
Marketing spend	< 3 % of sales (service firms)	Ads, website, SEO content

Spending $ 10k on any of these knocks roughly $ 2.6k off your corporate tax and boosts capacity or sales.

Industry‑Specific Questions

Sector	Quick reality‑check questions
Construction / Home Services	“Do holdbacks choke cash?” “Tools under $1 k expensed immediately?”
E‑Commerce	“Charging correct sales tax in every province?” “Dead stock to write down?”
Restaurants	“Kitchen refit planned?” “Tips recorded the same way each pay period?”
Consulting / Agencies	“Billable utilisation running > 75 %?” “Passing travel costs straight through without GST/HST?”

Step 5: Run the 30‑minute review

0‑5 min: Set the target—after‑tax cash vs. reinvest.
5‑20 min: Walk the strategy checklist; mark Yes/No.
20‑25 min: If profit is crowding $ 500k, pick a spend‑to‑save move.
25‑30 min: Assign each action a date and an owner (even if that’s you).

Step 6: Build your one‑page Impact Sheet

Move	Tax before	Tax after	Saving
Salary top‑up for mortgage	$27 k	$18 k	$9 k
Equipment purchase (100 % write‑off)	$15 k	$6 k	$9 k
Keep profit under $500 k	$64 k	$59 k	$5 k
Wage to spouse (TOSI‑free)	$7 k	$4 k	$3 k
Total			$26 k

End the sheet with a 90‑day checklist of

Things to buy before year-end
Shifts needed in your payroll structure
Missing documentation that needs to be created

And you’re done

How to Enhance Tax Planning

Depending on the size and complexity of your business, tax planning isn't too hard.

The difficult part is staying up to date with all the things you can avail. We try to keep this blog up to date, but realistically, without knowing

The nuance of your business
Researching more industry-specific tax questions

You may still be paying more than you need to. Use this as a first step, and if it makes sense to have an accounting team down the line, book an initial consultation with our team here.

View full post