Pulling money out of the clinic corporation — the 2026 numbers (25 Oct 2026)

The corporate rate changed this year — this matters for the decision

Ontario's small business rate fell from 3.2% to 2.2% on 1 July 2026 (2026 Ontario Budget; Budget Measures Act, Royal Assent 24 April 2026). Because Ontario prorates a straddling tax year by days (Taxation Act, 2007, s.31(4)), a calendar-year corporation pays a blended Ontario rate of 2.696% in 2026, not 2.2%. With the 9% federal SBD rate that is 11.696% combined on the first $500,000 of active business income in 2026 — 11.2% on a full year at the new rate, from 2027 on.

Any "leave it in the corp at 12.2%" arithmetic is now out of date by about half a point.

Personal rates, 2026 (unchanged from budget)

Income type	Top combined rate
Regular income (salary)	53.53%
Non-eligible dividends (what a CCPC pays)	47.74%
Eligible dividends	39.34%
Capital gains	26.76%

Watch the 2027 change: Ontario is cutting the non-eligible dividend tax credit from 2.9863% to 1.9863% effective 1 January 2027, which pushes the non-eligible dividend top rate from 47.74% to 48.89%. If a large dividend is coming out, the calendar matters.

Salary vs dividend — computed, not estimated

Model assumptions: the amount is paid out of corporate pre-tax profit; the salary route includes CPP on both sides (2026: YMPE $74,600, 5.95% each side, max $4,230.45 each; CPP2 4% each side to $85,000, max $416 each — so $9,292.90 of CPP in total at a salary of $85,000+); the dividend route pays 11.696% corporate tax first and then 2026 non-eligible dividend rates.

Corp pre-tax profit	Salary route — total tax	Dividend route — total tax	Dividend advantage
$100,000 (no other income)	$28,601 (28.6%)	$21,439 (21.4%)	$7,162
$200,000 (no other income)	$71,022 (35.5%)	$61,909 (31.0%)	$9,112
$100,000 (stacked on $120k of other income)	$52,821	$45,641	$7,180
$200,000 (stacked on $120k of other income)	$104,681	$97,147	$7,535

The dividend wins by roughly $7,000-$9,000 per $100,000-$200,000 pulled out, and it wins by a similar margin whether or not he already has a salary from IPEX.

What that comparison leaves out — and it is not small

Salary creates RRSP room (18% of earned income, to the annual cap). Dividends create none. If he has unused RRSP room, a salary can beat the table above after the refund.
Salary builds CPP entitlement. Dividends do not. At 40-something with two young kids, that is a real but modest number — and the CPP cost above ($9,293 at $85k) is exactly what he is buying.
Salary is a deductible corporate expense and needs a T4 and a payroll account; a dividend needs a directors' resolution and a T5, and it can only come out of after-tax retained earnings.
The non-eligible (not eligible) rate applies because the corporation's income was taxed at the small business rate. Paying an eligible dividend out of SBD-taxed earnings is a tax error.
Passive income above $50,000 in the corporation starts grinding down the $500,000 small business limit — relevant the moment QLD or other investments sit inside the corp rather than personally.

The shareholder-loan route — the one with a hard deadline

Prescribed rate for Q4 2026 is 3.00% (CRA, in effect 1 Oct – 31 Dec 2026; it has been 3% all year).
A loan to a shareholder must be repaid by the end of the corporation's taxation year following the year the loan was made, or it is included in his income as a deemed dividend — with no dividend tax credit. For a 31 December year-end, money taken in 2026 must be back in the corporation by 31 December 2027.
Interest at the prescribed rate must be paid within 30 days of the corporation's year-end, or the benefit is computed at the prescribed rate anyway and the interest is deemed a benefit.
A shareholder loan is not a tax plan, it is a bridge. If the money is not coming back, it is a salary or a dividend dressed up as a loan, and CRA treats it as such on audit.

The HST point that costs directors personally

HST collected is held in trust. ETA s.323 makes directors personally liable for unremitted GST/HST, and there is a due-diligence defence only if he can show he exercised care. Pulling cash out while leaving the HST short converts a corporate problem into a personal one. Ring-fence the HST and the income tax instalments first, then decide the extraction.

Recommendation

Dividend for the bulk, salary to top up to the RRSP/CPP level he wants — that is the standard split, and the arithmetic above supports it. Do not use a shareholder loan for money that is not coming back. Get the accountant to confirm the corporation's retained earnings and its GRIP/non-eligible pool before a resolution is drafted, because the dividend can only come out of after-tax retained earnings that exist.

Sources: Ontario 2026 Budget + Budget Measures Act (SBD rate 3.2%→2.2%, July 1 2026); Taxation Act 2007 s.31(4) day-proration; EY 2026 Ontario combined personal tax rate table; CRA CPP contribution rates and maximums 2026 (YMPE $74,600, YAMPE $85,000); CRA prescribed interest rates, Q4 2026 (3%); ETA s.323.