The tax on split income (TOSI) is a set of rules in the Income Tax Act, expanded in 2018, that applies the top marginal personal tax rate to certain income — most commonly private-corporation dividends — received by an individual from a related person's business, unless a specific exclusion applies. The rules were introduced to limit "income sprinkling," the practice of spreading business income among family members in lower tax brackets.
The exclusions are central to the regime. They include amounts received by a family member actively engaged in the business (the excluded-business exclusion), dividends on "excluded shares" held by a shareholder aged 25 or older who meets ownership and income tests, and exclusions tied to a business owner reaching age 65. Where an exclusion applies, the recipient is taxed at their own graduated rates; where none applies, TOSI claws back the splitting benefit.