How you think about your taxes may distinguish you from your peers.
By Nicholas Flemming, CPA, CFA, M.Sc, FMA
When do you start thinking about your taxes? February? March? April? Perhaps you’re a habitual late filer, believing that there is no rush to file if the government owes you money.
April 30th, 2025 is the official deadline for most Canadians to file their personal income tax return and pay any taxes owed, but in the hallowed halls of Canada’s big Wealth Management firms, planning for this year’s tax season started roughly a year ago, and in many cases, much earlier than that.
You see, top earners take their duty to pay taxes seriously, but they start with the belief that money earned is theirs, not the government’s. They know that the best way to ensure they keep more of their earnings is to proactively structure their finances in advance.
When it comes to tax planning, proactivity is key. Nothing should be left to chance.
Most Canadians consider this beautiful country a high tax jurisdiction, but saying “Canadians pay a lot of tax” is not entirely accurate. If, for example, you’re one of the 9.1 million Canadian tax filers who paid zero income tax in 2024, you probably scratch your head when people complain about high taxes.
However, if the number on line 26000 of your personal tax return was larger than $235,675 in 2024 and you live in Ontario, 53 cents of every dollar you earn above that number will go to the CRA each year.
To this group of people, Canada is most certainly a high tax jurisdiction, meaning there are massive incentives to approach tax planning with laser-like precision.
So, how exactly do high earners approach tax season?
They start early. If you’re scrambling for tax deductions in April because you owe the government money, it’s already too late. In fact, at Flemming Private Wealth, our most successful clients have learned that it’s not about deductions at all; it’s about fundamentally reengineering how you earn and how you pay tax. If done early enough, the compounding effects can be life changing.
For example, many of our clients forecast their income and expenses at least one year ahead. This proactivity allows a taxpayer with variable components to her income stream to target a desired tax bracket in advance, as opposed to taking what she gets at tax time.
Secondly, high earners focus their attention on the big numbers. While most Canadians diligently make their RRSP contributions and perhaps deduct a few expenses, taxpayers in the highest income and wealth brackets take proactive steps to allow for much greater control over the character of their future income receipts.
For example, an entrepreneur or professional may decide to incorporate, allowing her to recharacterize large chunks of formerly regular income into more tax efficient forms of income, like dividends.
Equally, incorporating affords much more control in aligning income with expenses, lessening tax on income earned that you don’t need.
For example, why pay tax on $300,000 of regular employment income if you know from diligent, proactive planning that you only need $80,000 of dividend income to support your living expenses? The portion of your earnings that you don’t need can be left in your corporation to invest, compound, and grow.
But what about employees or individuals that an unable to incorporate?
Many employees we work with have impressive career prospects, and many are surprised to learn just how much power they can wield in the compensation departments of the startups they work for in ultra-competitive industries like tech and engineering.
In these situations, it’s best to focus on deferral arrangements, like Deferred Share Unit (DSU) plans, which allow disciplined savers to divert income that would otherwise be taxed into company stock units that will only become taxable when sold or redeemed.
A deferral arrangement may sound complex, but at its core tax deferral is nothing more than (legally) delaying your tax payments so that you can use these funds in the interim to grow your wealth. It doesn’t get much better than using the governments money to invest and enrich yourself in the meantime. Speak to your HR department today!
Finally, whether you’re currently a high earner or heading in that direction, know that there is no bigger drag on wealth creation than tax. While the masses focus on counting lattes and switching to robo advice to minimize their management fees, the top 1% are focusing on the elephant in the room – finding ways to pay substantially less tax.
