I withdrew $80,000 from my company, why does it reflect $93,000 on the T5 I received?
There are two main reasons for the difference between your taxable dividend and cash draws:
Dividend gross-up
The dividend is grossed up by 15% (2019) for non-eligible dividends. This is offset by a dividend tax credit that is applied on your personal tax return in the year you received the dividend. The theory behind this is quite technical; learn more about dividend gross-up.
Dividend gross-up and tax credit simply reduce the tax you personally pay to reflect the corporate taxes your business already paid.
Non-eligible dividends are paid by corporations that qualify for the small business tax rate of 9%. The gross-up and the accompanying tax credit reflect the fact that the company has already paid tax.
Companies that do not qualify for the small business deduction and pay the 28% tax rate can pay eligible dividends, which have a different gross-up and accompanying tax credit than the small businesses that pay 9% tax.
To learn more about the non-eligible dividend tax credit, click on the following link:
Learn more about the non-eligible dividend tax credit
Personal expenses and benefits
Your cash draws can be increased or decreased by the amount of personal expenses either paid for by yourself or the company.
Example 1: Vehicle expense - If the vehicle is owned by the corporation and is used personally, then an amount would be calculated based on personal usage and would increase the amount of money considered as a draw from the company.
Example 2: Cell phone - When the cell phone is owned and paid for personally, the amount allocated to business use would be used the decrease the amount of money considered as a draw from the company.
To learn more about paying yourself dividends, please visit our blog Getting paid: choosing how to pay yourself