Introduction

For an Ontario physician whose professional corporation earns approximately $300,000 in net annual income (after practice overhead), the tax planning picture is focused primarily on the salary/dividend mix, RRSP optimisation, and beginning to think about passive income accumulation. The small business deduction is comfortably available. The passive income threshold is not yet a concern. The CPP decision is live.

This article is a practical planning guide for physicians at this income level — not a theoretical overview, but a description of what the actual decisions look like in 2026.

The Corporation's Tax Position

At $300,000 of net active income, the MPC pays the small business deduction rate on the full amount — approximately 12.2% combined in Ontario, producing a corporate tax of approximately $36,600. After-tax corporate income is approximately $263,400.

This retained amount can remain in the corporation (invested, with passive income), be drawn as salary, or be paid as dividends.

The Compensation Decision

Option A — Pay $100,000 salary, retain $200,000

Salary: $100,000 drawn as employment income. Personal tax at the Ontario marginal rates on $100,000 of income (first bracket income) — effective personal tax approximately $26,000. RRSP room generated: $18,000 (18% of $100,000). CPP contributions: approximately $7,735 combined (employee plus employer).

Corporate retention: The MPC retains the remaining ~$200,000 after corporate tax, invested for future distribution.

Option B — Pay $190,000 salary to access full RRSP room, retain $110,000

To generate the maximum 2026 RRSP room ($32,490 limit), salary must be at least approximately $180,500 ($32,490 ÷ 0.18). Drawing $190,000 as salary generates slightly more than the full RRSP limit.

At $190,000 of personal income, the marginal rate in Ontario is approximately 46.41%. The RRSP contribution of $32,490 reduces taxable income to approximately $157,510 — a meaningful reduction, but the taxes on the $190,000 salary before the RRSP deduction are higher than on $100,000.

Option C — Pay no salary, distribute $100,000 as non-eligible dividends

No CPP cost. No RRSP room. Personal tax on $100,000 of non-eligible dividends in Ontario is approximately $24,800 at the relevant bracket. The corporation retains the rest.

What Makes Sense at $300,000

The analysis at this income level generally supports:

Salary of approximately $100,000–$130,000: Enough to generate meaningful RRSP room (approximately $18,000–$23,400), maintain some CPP contributions without overpaying the employer share, and keep the physician's personal income at a manageable marginal rate (under 46%).

RRSP funded from the salary: The physician should be contributing at or near the generated room each year.

Remaining retained earnings invested in the corporation: At $300,000 of income, the corporation is not approaching the passive income threshold quickly — there is time to accumulate before the $50,000 AAII concern becomes pressing.

Spousal RRSP contributions: Where the physician's spouse has lower anticipated retirement income, contributing to a spousal RRSP from the physician's earned income builds a second income stream in retirement.

What to Watch at This Level

The physician approaching $300,000 consistently should begin modeling when the corporate investment portfolio will start generating $50,000 of annual passive income — and what that does to the SBD. At $300,000 of net income, with $36,600 in corporate tax and a meaningful salary draw, perhaps $150,000–$200,000 of after-tax retained earnings is added to the investment portfolio each year. At that accumulation rate, the passive income threshold becomes relevant within five to seven years.

When to Speak With a CPA

Annual compensation planning at this income level produces meaningful outcomes — the difference between an optimised and a default salary/dividend mix can easily be $8,000–$15,000 in annual after-tax income, compounding over a career. The planning conversation at this level is not complex — but it needs to happen before the fiscal year closes, not after.

Rotaru CPA works with physicians across income levels on annual compensation planning and corporate tax. Book a consultation to review your compensation structure.