Can my Ontario corporation choose any fiscal year end, and does it affect taxes?

Unlike individuals who always have a December 31 tax year, a corporation can choose any month end as its fiscal year end when it files its first tax return. Once established, the year end is fixed unless you apply to the CRA and receive approval to change it.

The fiscal year end matters for tax planning because it determines when income is reported and when tax is due. Corporate income tax is generally due within two months after the fiscal year end (three months for CCPCs that claim the small business deduction, if certain conditions are met). Choosing a year end that coincides with a slow period of your business cycle can make cash flow management easier.

Year end also determines the timing of deductions. Expenses incurred before year end reduce that year's income; expenses after year end fall into the next period. Bonuses accrued to owner-managers must generally be paid within 180 days of the corporate year end to be deductible in that year. Planning bonuses, capital cost allowance claims, and other deductions around the fiscal year end is a standard owner-manager tax strategy — coordinate it with your accountant each year.