TOSI taxes split income at the top rate by default. A handful of narrow carve-outs decide whether a family dividend actually falls inside it.
Short answer
Sometimes, but only within specific carve-outs. Section 120.4(2) adds “the highest individual percentage for the year multiplied by the individual’s split income for the year” to a specified individual’s tax payable — and one of the excluded-amount carve-outs treats an amount as excluded where the recipient’s spouse or common-law partner “has attained the age of 64 years before the year”.
Subsection 120.4(1.1)(c) deems an amount to be an excluded amount for a specified individual where it would have been excluded for their spouse or common-law partner, and that spouse has turned 64 before the year in question — effectively, once the higher-earning spouse reaches the year they turn 65. A separate route runs through the “excluded shares” definition, which requires the individual to hold at least 10% of both the votes and the value of a corporation earning under 90% of its income from services, among other conditions.
The rules run differently again for property acquired on the death of a parent: paragraph 120.4(1.1)(b) can let a younger specified individual inherit the deceased’s own active-engagement history for the purpose of the excluded-business and reasonable-return tests, effectively borrowing the parent’s years of active involvement rather than requiring the child to have accumulated them personally.
One file shows a retiring founder’s spouse escaping the top-rate split-income tax on a holding-company dividend for the narrowest of reasons: the founder’s own age. A second shows the opposite pressure point, where freeze shares put in a young child’s name years earlier nearly turned a sheltered gain into something much worse on a pre-sale buyback.
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