Tax deferral is the strategy of delaying when tax becomes payable, allowing money to remain in a corporation or a tax-sheltered structure longer to earn returns on amounts that would otherwise have been paid to the CRA.
The value of deferral is compounding. A dollar of tax deferred for five years at a 6 percent return is worth more than a dollar paid immediately, the difference being what the retained funds generate over that period. CCA optimization, RRSP contributions, bonus accruals, and corporate structure decisions are all mechanisms for managing when income becomes taxable.
Deferral is not evasion. It is the deliberate use of provisions built into the Income Tax Act to manage cash flow and accumulate wealth more efficiently. The discipline is in choosing which deferrals to use, in which years, and in which entity, rather than pursuing maximum deferral in every period without considering when and at what rate the deferred tax will eventually be paid.
See also: Tax Planning · Capital Cost Allowance (CCA) · HoldCo vs OpCoTax deferral strategy compounds in value over time when it is planned rather than incidental. See how Wefinx approaches tax planning.