Yes, you can pay your spouse if you own a small business in Ontario, but there are specific rules to follow. The salary you pay your spouse must be reasonable and reflect the actual work they do for the business. This means the amount should be comparable to what you would pay someone else with the same skills and responsibilities. Paying your spouse can be beneficial for income splitting, potentially lowering your overall family tax burden.

However, the Canada Revenue Agency (CRA) closely monitors these arrangements to ensure they are legitimate. If the CRA finds the salary unreasonable or if the spouse isn't performing real work, they could disallow the expense, leading to tax penalties. It’s important to keep detailed records of the work performed and the compensation provided. Consulting with a tax professional can help ensure compliance and optimize tax benefits when paying your spouse through your business.