In today’s economic climate—with interest rates holding steady at elevated levels and inflation still impacting cash flow—small business owners are re-evaluating their savings strategies more than ever. One often-overlooked tool that can serve both personal and business-related financial goals is the Tax-Free Savings Account (TFSA).
While TFSAs are technically part of personal banking, their features make them an excellent resource for business owners looking to build flexibility into their financial planning—both inside and outside the business.
Here are seven reasons why every Canadian small business owner should consider incorporating TFSAs into their financial strategy.
1. Access Your Funds Tax-Free—And Re-Contribute Later
TFSAs offer unmatched flexibility: any amount you withdraw can be re-contributed the following calendar year without reducing your annual contribution limit.
Let’s say you withdraw $30,000 this year to manage unexpected business expenses. That amount becomes a new contribution room next year—on top of the 2025 TFSA limit of $7,500 (unchanged from 2024).
💡 Pro tip: Always check your latest CRA Notice of Assessment or My CRA Account to confirm your available room before contributing—overcontributions are penalized at 1% per month.
2. Bridge Short- and Medium-Term Business Needs
Inflation, rising wages, and cost-of-living pressures are creating new challenges for small businesses. Whether you’re saving for lease renewals, loan payments, equipment upgrades or just building a rainy-day fund, TFSAs give you liquidity without tax implications.
Depending on your risk tolerance and time horizon, you can choose from a high-interest TFSA, TFSA GICs, or market-based options. Just be mindful of liquidity—some GICs may lock in your funds for several years.
3. Double Your Tax-Free Power With a Spouse or Business Partner
Every Canadian adult has their own TFSA contribution room, which makes TFSAs ideal for couples or co-owners looking to strategically pool personal resources.
Coordinating TFSA contributions with a spouse can create a flexible retirement buffer, provide access to tax-free income in lean years, and support family business planning. The combined growth—compounded and tax-free—can make a big impact.
4. Use TFSAs for Estate and Succession Planning
Unlike RRSPs, which are taxable upon death (unless rolled to a spouse), TFSAs can be passed on to your beneficiaries completely tax-free.
Business owners can name:
- A successor holder (typically a spouse), or
- One or more beneficiaries (such as children or dependents)
This can be an effective way to pass along tax-sheltered wealth without triggering tax consequences or affecting the beneficiaries’ own TFSA limits.
5. Maximize RRSP Impact Later by Starting with a TFSA Now
If you’re currently in a lower tax bracket—common during early years of business ownership—it may be more beneficial to prioritize TFSA contributions over RRSPs.
Why? RRSPs generate tax deductions that are most effective when you're in a higher income bracket. In the meantime, a TFSA allows you to grow savings tax-free. When your income increases, you can shift some of those funds into your RRSP for a larger tax break.
This flexible sequencing helps you optimize your overall tax picture across different phases of your business journey.
6. Keep Growing Savings After RRSP Age Limits
Once you turn 71, you can no longer contribute to an RRSP, but the TFSA remains fully available with no age restriction. For business owners who delay retirement—or don’t plan to retire at all—this is a crucial advantage.
If you convert your RRSP to a RRIF and don’t need all the income right away, consider moving unused withdrawals into your TFSA, where it can continue to grow tax-free until needed.
7. Attract and Retain Employees with TFSA Group Plans
Group retirement savings programs aren’t just for large corporations. More small businesses are offering flexible group TFSA and RRSP plans to improve retention and compete for talent in today’s tight labour market.
Offering both RRSP and TFSA options:
- Appeals to a wider range of employee ages and savings goals
- Supports employees who are over 71 (who can no longer use RRSPs)
- Helps younger staff save for short-term goals like buying a home or paying down debt
A group TFSA plan can be a cost-effective way to enhance your compensation offering and build employee loyalty.
Final Word: TFSAs Aren’t Just for Retirement—They’re a Business Tool
At first glance, TFSAs seem like a purely personal financial product—but for small business owners, they offer a flexible, tax-efficient savings vehicle with real business utility. From covering unexpected costs to building wealth across generations, the TFSA deserves a spot in your overall strategy.
Koroll & Company Can Help
Whether you're self-employed or running an incorporated business, understanding how TFSAs fit into your tax and savings strategy is essential. At Koroll & Company, we help Ontario business owners navigate the evolving financial landscape with clear, tailored advice.
Need help integrating TFSAs into your business or estate plan? Contact our team today.
