Medical and Dental Practice Accounting in Alberta
Most practices are told early on that health care is exempt from GST and reasonably conclude they can stop thinking about it. That holds until the practice starts doing something that is not treatment, and by then the registration question is usually being answered late.
Exempt is not the same as outside the system. It means no tax charged and, ordinarily, no input tax credits claimed either, and the boundary between exempt and taxable in this sector is drawn by the purpose of what you supplied rather than by your profession.
Purpose decides the tax, not the profession
Since the rules were tightened, a service rendered by a health care professional can be taxable or exempt depending on why it was provided. The test is whether it is a qualifying health care supply, meaning one made for the purpose of assisting an individual, other than financially, in coping with an injury, illness, disorder, or disability. The CRA takes purpose to mean the ultimate aim or reason for which the supply is made.
A cosmetic service supply, made for cosmetic rather than medical or reconstructive purposes, is generally taxable. The CRA’s own examples include liposuction, hair replacement, botulinum toxin injections, teeth whitening, face lifts, and breast augmentation. Reports, examinations, certificates, and assessments prepared for a third party rather than for treatment are the other common taxable category.
The practical consequence is a practice with a small but growing taxable stream: a few cosmetic procedures, insurer or employer reports, expert opinions. Once that stream is large enough, registration is required, and the point at which it crossed the line is not something you want to establish in hindsight.
Dentistry has an arrangement that has been withdrawn
A supply of an orthodontic appliance is zero-rated, which is different again from exempt: it carries tax at zero percent and does allow input tax credits on related costs. Because appliances are supplied alongside treatment that is exempt, the CRA agreed an arrangement with the Canadian Dental Association in 1991 under which a registered dentist could estimate up to 35 percent of the total consideration charged for orthodontic treatment as consideration for the appliance, then reconcile to actual amounts at year-end.
That arrangement has been revoked. The revocation takes effect from the first day of the registrant’s fiscal year beginning on or after January 1, 2025, and the CRA points to case law confirming that a dentist can claim input tax credits on orthodontic appliances supplied with orthodontic services.
If your practice has been using the 35 percent estimate, the method needs to change and the claim now has to be built from what you actually charged and paid. That is a records question before it is a tax question.
Money moving inside a group practice
Associate arrangements, cost-sharing groups, and clinics where one party owns the premises and staff while others practise there all involve payments between the parties. Those payments are not automatically exempt just because everyone involved is a health care professional.
What matters is what is actually being supplied. Administrative services, use of premises, staff, and equipment are a different supply from treatment, and the label used in the agreement does not settle the question. Whether the arrangement is a partnership, a cost-sharing arrangement, or a landlord and tenant relationship changes both the GST answer and the income tax one, and it is much easier to set up correctly than to unwind after several years.
The practice as a business
Alongside the questions unique to health care sit the ordinary ones, which do not get easier for being ordinary.
- Incorporation and compensation, subject to what your college permits. The split income rules affect service businesses in particular, and we cover that on our professional corporations page.
- Hygienists, associates, and administrative staff, where the employee or contractor question is decided by how the relationship actually works rather than by the contract heading.
- Equipment and fit-out, where operatories, imaging equipment, and leasehold improvements sit in different classes and are written off on different bases.
- Buying into or selling a practice, where how the price is allocated between goodwill, equipment, and receivables affects both sides for years afterwards.
How we work with practices
A solo practitioner, a clinic with associates, and a partner buying in each need a different conversation. What they share is a schedule that leaves very little room for the accounting.
- Corporate and personal returns prepared together, with the compensation decision made before year-end.
- GST review of what your practice actually supplies, and registration where taxable activity has grown.
- Payroll and WCB-Alberta for clinical and administrative staff.
- Bookkeeping that separates exempt treatment, taxable services, and zero-rated appliances cleanly enough to support a claim.
- Practice purchase and sale support, including how the purchase price is allocated.
Questions we get from producers
Possibly. Exempt status attaches to qualifying health care supplies, meaning services provided to help someone cope with an injury, illness, disorder, or disability. Cosmetic procedures and reports or examinations prepared for a third party are generally taxable. A practice with a growing stream of that work can pass the registration threshold, so it is worth reviewing what you actually supply rather than assuming your profession settles it.
Those made for cosmetic rather than medical or reconstructive purposes. The CRA’s examples include liposuction, hair replacement, botulinum toxin injections, teeth whitening, face lifts, and breast augmentation. Purpose is what decides it, so the same procedure can fall either way depending on why it was performed, and the reason belongs in the clinical record.
No. The CRA has revoked the administrative arrangement it agreed with the Canadian Dental Association in 1991, effective from the first day of your fiscal year beginning on or after January 1, 2025. Input tax credits on orthodontic appliances are still available, but the claim now has to be supported by actual amounts rather than the estimate, which means the records have to carry it.
It depends on what is being supplied rather than on who the parties are. Administrative services, use of premises, staff, and equipment are different supplies from treatment and are not automatically exempt. The structure also matters: a partnership, a cost-sharing arrangement, and a landlord and tenant relationship give different answers for both GST and income tax.
It is decided by how the relationship actually operates, not by what the agreement is called. The CRA weighs control over the work, who supplies the tools and equipment, whether the worker can subcontract, the financial risk carried, and whether there is a genuine chance of profit or loss. If it is later found to be employment, the unremitted CPP and EI are assessed against the practice.
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