Low-Cost Shareholder Loan Tax Planning for Canadian Businesses

Online banking is the simplest route: add the CRA as a payee, select the account and tax year precisely, and pay from your chequing account. CRA My Payment takes debit card payments, and pre-authorised debit can be scheduled in My Account or My Business Account for a single amount or a run of instalments. Corporations and GST/HST registrants use the same channels under their business number. Keep the confirmation number and allow several days for the payment to post.

On profit. Corporations and unincorporated businesses are taxed on net income, meaning revenue minus deductible expenses and capital cost allowance, not on gross sales. Revenue matters for other things: GST/HST registration once taxable revenue passes $30,000 over four consecutive calendar quarters or in a single quarter, and payroll and information reporting. Federal corporate tax is 9% on the first $500,000 of active business income for 2026, with a general net rate of 15%.

There is no single definition. For tax the test that matters is the small business deduction: a Canadian-controlled private corporation earning active business income claims the lower rate on the first $500,000 of it for 2026, shared across associated corporations. Federally that limit falls by $5 for every $1 of adjusted aggregate investment income above $50,000 and is gone at $150,000, while Ontario keeps the full $500,000. Grant and lending programs use their own headcount or revenue tests.

Call the individual tax enquiries line listed on the CRA's contact page on canada.ca; the automated menu leads to an agent during business hours. Have your social insurance number, date of birth and an amount from a recent return ready, because the agent cannot open your file without them. Walk-in counter service is not offered, and in-person help is limited and by appointment. If you would rather not deal with the CRA yourself, authorise a representative in My Account or with an AUT-01.

Close the books for the fiscal year, prepare financial statements, then file a T2 return with the CRA for that year end within six months of it. For tax years beginning after 2023 — which covers every 2025 and 2026 year end — electronic filing is mandatory for essentially all corporations, with no gross-revenue threshold, and paper-filing a return that had to go in electronically draws a $1,000 penalty. Alberta and Quebec require their own provincial corporate return as well. A corporation with no activity still has to file. Keep the supporting records six years from the end of the last tax year they relate to.

A refund is only the difference between tax already withheld and the tax you actually owe, so a small refund usually means your payroll deductions were close to correct. Income with no tax withheld, such as self-employment, gig work or investment income, absorbs the rest. Non-refundable credits cut tax to zero but pay nothing beyond that. Compare your notice of assessment with the return you filed to see which lines the CRA changed.

Your marginal rate is the tax on your next dollar. Federal brackets for 2026 run 14%, 20.5%, 26%, 29% and 33% on the highest band, with your province's brackets stacking on top. Your average or effective rate is total tax divided by total income, and it is always lower, because earlier dollars sat in lower brackets or were sheltered by credits. Use the marginal rate to judge an RRSP contribution or extra contract work, the average rate to see what the year cost.

A T4A reports amounts that are not employment income, such as pension or annuity payments, certain benefits and fees paid for services to someone who is not your employee. Payroll slips for a calendar year are due to the recipient and to CRA by the end of February following that year. Employment income belongs on a T4 instead, where controlled tips paid through the business are included; tips a customer hands directly to staff are not, but the employee still reports them.

For individuals the return itself is the T1, the Income Tax and Benefit Return; a corporation files the T2. What people usually mean by tax documents are the slips that feed the return, such as the T4 for employment income, the T5 for investment income and the T3 for trust income, plus receipts for RRSP contributions, tuition, medical expenses, donations and childcare. Self-employed income goes on Form T2125. After filing, the CRA issues a notice of assessment.

All of it. No threshold lets cash go unreported: tips, side jobs, weekend work and cash sales are income the moment you earn them, and the CRA can reassess unreported amounts with penalties and interest. Keep a log of dates, amounts and payers, and deposit takings so records reconcile. Self-employed cash earnings go on Form T2125 with your T1 return; cash tips earned as an employee are employment income, not business income, and belong on the other-employment-income line of the T1 instead.

Interest on a student line of credit or an ordinary bank loan cannot be claimed. The student loan interest credit applies only to interest on loans issued under the Canada Student Loans Act, the Canada Student Financial Assistance Act, a provincial or territorial student loan programme or similar legislation. A line of credit stays ineligible even where the money went to tuition, and rolling a government loan into a line of credit ends eligibility permanently.

Bring every slip issued to you for the year, T4, T5 and T3 among them, plus receipts for deductions and credits such as RRSP contributions, medical expenses, donations, child care and tuition. Add last year's return and notice of assessment, any CRA letters, and the authorisation your preparer needs to see your account. If you have self-employment or rental income, bring income and expense totals with the records behind them. Flag any change in marital status, dependants or residency.