Introduction

A physician whose MPC earns $1 million or more in net annual income — after overhead and before any physician compensation — is in the top tier of professional income earners in Canada. At this level, the SBD is only available on the first $500,000 of active income (with further reduction likely from passive income), the personal marginal rate is at or near the Ontario top of 53.53%, and every planning decision operates at a scale where the dollar impact is significant.

The Corporate Tax Position at $1 Million

On $1 million of net active income:

SBD-eligible first $500,000: corporate tax at 12.2% = $61,000.

General rate income $500,001–$1,000,000: corporate tax at 26.5% = $132,500.

Total corporate tax: approximately $193,500.

After-tax corporate income: approximately $806,500.

If passive income from accumulated retained earnings is also reducing the SBD, the effective corporate tax rate on the first $500,000 increases. At $150,000 of AAII (the threshold at which the SBD is fully eliminated), all $1 million is taxed at the general rate — corporate tax of approximately $265,000.

Priority 1: Multi-Entity Structure Is Not Optional

At $1 million of income, the operating MPC and at least one holding company are the minimum required structure. A physician at this income level who does not have a holdco is leaving significant SBD erosion unchecked and accumulating investment assets in the operating corporation at a rate that accelerates the passive income problem.

The holdco receives excess retained earnings annually through inter-corporate dividends. The operating MPC investment portfolio is managed below the AAII threshold. The holdco accumulates long-term investment wealth.

In some cases, a second holdco — one for real estate, one for financial investments — is warranted where the physician also owns investment properties that generate rental income.

Priority 2: The Compensation Decision at $1 Million

At $1 million of corporate income, the compensation decision is governed more by the general vs. SBD rate management than by personal marginal rate optimisation. The RRSP limit ($32,490) is reached at $180,500 of salary — drawing more salary than this generates no incremental RRSP room.

A typical structure at this income level:

Salary of $180,000–$200,000: Generates the full RRSP room. Provides CPP entitlement. Personal tax at ~46–48% marginal rate.

Eligible dividends from GRIP balance (income above $500,000 taxed at general rate): The $500,000 taxed at the general rate generates a GRIP balance that supports eligible dividend payments at the ~39.34% Ontario top rate.

Non-eligible dividends from SBD-rate retained earnings: Phased to manage personal net income relative to other income sources.

Balance retained and transferred to holdco.

Priority 3: The Estate Freeze

At $1 million of annual income with significant accumulated wealth, the deemed disposition at death — the capital gain on the MPC shares — is a material estate concern. A physician at this income level who has been incorporated for ten years may have an MPC and holdco combined worth $5–$8 million.

The estate freeze converts the physician's common shares to fixed-value preferred shares at current value, with new common shares issued to family members or a family trust. Future growth in the corporation's value accrues to the new common shares — outside the physician's estate for deemed disposition purposes.

The freeze should happen before the values grow further, not after.

Priority 4: Life Insurance as a Planning Tool

Corporate-owned life insurance at this level serves multiple purposes: building the CDA balance for tax-free estate distributions, providing liquidity for the deemed disposition tax in the terminal return, and funding a buy-sell agreement if the physician has business partners.

The policy should be sized based on a current valuation of the corporate interests and the estimated terminal tax liability.

When to Speak With a CPA

At $1 million of MPC income, the planning conversation is not annual — it is ongoing. A CPA, an estate lawyer, and a financial advisor should all be involved in an integrated planning process. The decisions made — and not made — at this income level have compounding consequences measured in millions of dollars over a career.

Rotaru CPA works with high-income physicians on multi-entity structure, estate freeze planning, and integrated wealth management. Book a consultation to review your full corporate and personal tax position.