Petty cash and reimbursing yourself — what the CRA expects to see

Every incorporated owner pays for something personally at some point — parking at a client site, a part on the way to a job, a domain renewal on whatever card was handy. The expense and the deduction are real. Whether the corporation gets the deduction depends on the paperwork, not the payment.

Reimbursement, allowance and draw are three different things

These terms are not interchangeable. A reimbursement repays a specific amount you spent for the corporation, supported by the receipt. An allowance is a fixed amount paid in advance without specific receipts; one that is unreasonable or has no measurable basis is generally a taxable benefit reported on a slip. A draw is money taken out with no business expense behind it; it lands in the shareholder loan account and must eventually be treated as salary, a dividend or a repayment.

Getting the label right matters because the tax consequences diverge sharply. A properly supported reimbursement changes nothing on your personal return. A round-sum monthly “expense allowance” paid without receipts can end up on a T4 as employment income.

What the CRA expects on the receipt

The CRA requires records backed by source documents, and the source document is the supplier’s receipt or invoice, not your credit card statement. A statement proves money left an account, not what was bought or that it was for the business — the two things a review turns on.

A usable receipt shows the supplier, date, item, amount and, for a GST/HST registrant, the tax and registration number — without which the corporation cannot support the input tax credit. A GST/HST reimbursement resting on a debit slip with no vendor detail is exactly what a reviewer pulls.

Write the business purpose on the receipt when it is not obvious: “Client meeting — supplier review” takes two seconds and answers the one question asked years later. Records must be kept for the retention period, so store images somewhere durable. See how long to keep records.

How to actually run reimbursements

Keep them deliberate rather than continuous. A workable routine for an owner-managed corporation is a single reimbursement run once a month, alongside the rest of the close:

1. Collect the receipts for business costs you paid personally during the month, captured digitally as you go rather than retrieved at month end.
2. List them — date, supplier, amount, GST/HST, purpose. A one-page expense report is enough, and it is what makes the payment self-explanatory later.
3. Pay one transfer from the corporation to you for the total, referenced to that report.
4. Post the expenses to their proper accounts, claim the GST/HST, and clear the reimbursement against the shareholder loan account.

One transfer per month with a supporting schedule is far easier to defend, and far easier to reconcile, than fourteen irregular transfers with no explanation attached.

Petty cash, if you really need it

Most small corporations no longer need a cash float, and an uncontrolled one becomes a hole in the books. If needed, run an imprest fund: a fixed float in a locked box, a receipt for each payout, and top-ups back to the fixed amount. Float plus receipts always equals the total; only top-ups are expensed; reconcile it monthly.

Cash sales are a separate matter. Businesses in cash-intensive sectors attract closer attention precisely because cash is harder to trace, and unreconciled cash movement is a common thread in CRA audit triggers.

The mistakes that cost the deduction

The common mistakes: reimbursing from a card statement when the receipt is gone; reimbursing small personal items, which taints the shareholder loan account; paying a round monthly amount as expenses, which risks a taxable benefit; and reimbursing mixed-use costs in full. Vehicles are the classic mixed-use case; see vehicle and mileage deductions.

The bottom line

Reimbursing yourself is simple and legitimate as long as three things hold: the expense is genuinely the corporation’s, a proper receipt exists, and the payment is recorded as a reimbursement, not an untraced transfer. Do it monthly with a schedule attached and it stops being a year-end problem.

This article is general information for Canadian business owners and is current as of July 2026. It is not tax, legal or accounting advice, and it does not create a client relationship. Tax rules change and your situation is unique, so please speak with a CPA before acting on anything here.