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 bought on the way to a job, a domain renewal charged to the card that happened to be in the wallet. The expense is real and the deduction is real. What determines whether the corporation actually gets that deduction is not the payment; it is the paperwork behind it.

Reimbursement, allowance and draw are three different things

The words get used interchangeably and they should not be. A reimbursement pays you back a specific amount you actually spent on the corporation’s behalf, supported by the receipt. An allowance is a fixed amount paid in advance without reference to specific receipts, and an allowance that is not reasonable, or not tied to a measurable basis, is generally treated as a taxable benefit and reported on a slip. A draw is money taken out with no business expense behind it at all, which lands in the shareholder loan account and eventually has to be characterised 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 to be supported by source documents that verify the information in them — and a source document is the receipt or invoice from the supplier, not your credit card statement. The statement proves that money left an account. It does not prove what was purchased or that the purchase was for the business, and those are the two things a review actually turns on.

A usable receipt shows the supplier’s name, the date, what was purchased, the amount, and — where the supplier is a GST/HST registrant — the tax charged and the supplier’s registration number. That last item is not decoration: without it the corporation cannot properly support the input tax credit on the purchase. A reimbursement claim that recovers the GST/HST but rests on a debit slip with no vendor detail is exactly the item a reviewer pulls.

Add the business purpose yourself where it is not obvious from the receipt. “Client meeting — supplier review” written on a restaurant receipt takes two seconds and answers the only question that will ever be asked about it years later. Records must be kept for the retention period and produced on request, so store the image somewhere durable rather than in a jacket pocket — see the guide to 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 one that exists without controls becomes an unexplained hole in the books. If cash is genuinely necessary, run it as an imprest fund: a fixed float, a locked box, receipts placed in the box for every disbursement, and a top-up that restores the float to its fixed amount. The float plus the receipts should always equal the fixed total, which makes the fund self-checking. The top-up is what gets recorded as expense, not the original float, and it should be reconciled monthly like any other account.

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 recurring ones are consistent: reimbursing from a credit card statement because the receipt is gone, which fails the source-document test; reimbursing personal items on the basis that the amount is small, which contaminates the shareholder loan account and the return; paying a round monthly amount and calling it expenses, which risks becoming a taxable benefit; and reimbursing mixed-use costs in full rather than apportioning them. Vehicle costs are the classic example of that last one and have their own rules, covered in the guide to vehicle and mileage deductions.

The bottom line

Reimbursing yourself is simple and legitimate, and it stays that way 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 rather than as an untraced transfer. Do it once a month with a schedule attached and the whole category disappears as a year-end problem — and stays defensible if anyone asks.

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 — please speak with a CPA before acting on anything here.