Home›Health clinics
Clinic guide · 2026
Accounting for regulated health clinics in Ontario.
Chiropractic, optometry, physiotherapy, psychology and veterinary practices. Running a clinic is a different accounting problem from practising alone: staff on payroll, several practitioners billing through one entity, product sales sitting beside treatment, and an HST position that changes depending on which of those a dollar came from. This is written for the owner.
Where clinics differ
The HST position is not the same in any two of these clinics.
A treatment room and a retail shelf can sit two metres apart and be taxed three different ways. This is the single most common place a general bookkeeper gets a clinic wrong, and it is worth knowing which column your revenue falls into before the return is filed rather than after.
| Clinic | Treatment billed to patients | What else the clinic sells | Where it goes wrong |
|---|---|---|---|
| Chiropractic | Exempt. Chiropractors are listed practitioners, so treatment carries no HST. | Custom orthotics, braces and supports, supplements, massage appointments, reports for insurers and lawyers. | A custom-made orthotic is zero-rated, not exempt, and the two are not the same thing. An off-the-shelf support is zero-rated only on the written order of a specified professional, and a chiropractor is not one for this purpose. Supplements are taxable. |
| Optometry | Exempt. Eye examinations by an optometrist carry no HST. | Prescription glasses and contact lenses, non-prescription sunglasses, solutions, cases and accessories. | Prescription eyewear is zero-rated, which is not the same as exempt: it counts toward the registration threshold and it carries full input tax credits. An optometry practice that treats its dispensary as exempt usually leaves recoverable HST on the table. |
| Physiotherapy | Exempt. Physiotherapy by a registered physiotherapist carries no HST. | Massage therapy, kinesiology, classes, braces, orthotics and independent medical examinations. | Massage therapy is not a listed service anywhere in the Act, so treatment by a registered massage therapist is taxable across Canada, Ontario included. The same hands-on work delivered by a physiotherapist within their own scope of practice can be exempt. Who performed it matters as much as what it was. |
| Psychology | Exempt, and more of it than before: counselling therapy and psychotherapy became exempt on June 20, 2024. | Assessments for courts, insurers, employers and school boards, plus workshops and training. | The direction of travel is toward more exempt revenue, which sounds like good news and is not always. A clinic whose taxable share has collapsed may have to stop claiming input tax credits, and the change-in-use rules can claw back credits already taken on equipment and leasehold improvements. |
| Veterinary | Nothing is exempt. The health care exemption is for services rendered to people. | Drugs, prescription diets, food, boarding, grooming, laboratory work. | The opposite mistake. A veterinary practice is a fully taxable business with full input tax credit recovery on essentially everything, and a bookkeeper who files it like a health clinic under-claims. The harder problem here is drug and consumable inventory, not the tax status. |
Across all five, a report written for an insurer, an employer, a lawyer or a court is generally taxable even when the same clinician's treatment is exempt. The CRA's test is the purpose of the supply: care for the patient is exempt, an opinion for a third party is not.
Exempt, zero-rated, taxable
Three words that decide what you can claim back.
Exempt and zero-rated look identical on the patient's receipt — no HST either way — and they are opposites on the return. Zero-rated supplies are taxable supplies at a rate of zero: they count toward the CA$30,000 registration threshold and they carry full input tax credits. Exempt supplies do neither.
That has two consequences a clinic owner feels directly.
Registration
Only taxable and zero-rated revenue counts toward the CA$30,000 threshold, and the test takes in the taxable supplies of the person and their associates together, so a second corporation does not buy a second threshold. A psychology practice billing CA$900,000, almost all of it exempt, can still be a small supplier. An optometry practice billing a fraction of that can be over the threshold on its dispensary alone, because prescription eyewear is zero-rated.
Input tax credits
A clinic that makes both exempt and taxable supplies can only recover the HST on the commercial-activity share of its costs. Rent, utilities, practice-management software, cleaning and reception wages all have to be split. The CRA's rule is that the method be fair and reasonable and used consistently throughout the fiscal year. Where substantially all of an input is used in commercial activity — the CRA reads that as 90% or more — all of it counts; where it is 10% or less, none of it does. Capital equipment has its own test at more than 50%, and that one is all or nothing: above the line the full credit, below it nothing at all.
Square footage, appointment counts and revenue share are all defensible bases. What is not defensible is changing the basis mid-year because a different one produced a better number, and that is what an auditor looks for first.
Three ways clinic books go wrong
Everything claimed. The bookkeeper sees an HST-registered business and claims the full credit on rent and overhead. On a mostly exempt clinic this is the expensive one.
Nothing claimed. The opposite: the clinic is treated as exempt end to end, and the recoverable HST on eyewear inventory, orthotics, retail stock and the taxable share of overhead is never claimed at all.
A method that moves. An allocation that is 40% in the first quarter and 65% in the fourth, with nothing on file explaining why, is the finding that turns a review into an assessment.
If the mix has shifted
Psychology and counselling clinics are the live example, but any clinic that drops a taxable service line has the same problem. When exempt revenue grows past the point where credits were justified, the change-in-use rules can require repaying part of the HST already claimed on capital property and leasehold improvements. It is worth modelling before the clinic deregisters, not after.
Associates and staff
Two separate risks hide in the same agreement.
1. Is the associate actually a contractor?
The CRA looks at the working relationship, not the title on the agreement: who controls the schedule and the treatment plan, who supplies the room, equipment and support staff, who carries the risk of a slow week, and whether both sides intended a contract for services. A practitioner who sets their own hours, works at more than one clinic and carries their own insurance looks like a contractor. One who is given a schedule, uses the clinic's equipment and staff, and is paid whether or not patients show up does not.
Get it wrong and the exposure is not only the CRA's. Ontario's Employment Standards Act has prohibited misclassification outright since November 27, 2017, and it does not matter that the practitioner asked to be treated as a contractor. The statutory reverse onus that came with it was repealed effective January 1, 2019, so an employer no longer carries a statutory burden of disproving employee status and an employment standards officer decides on the facts — but the prohibition itself stands, and a corporation convicted of an offence under the Act faces a fine of up to CA$100,000 on a first conviction and more after that. The larger number is usually the unremitted CPP and EI, with interest and penalties, plus the vacation and termination entitlements that were never accrued.
2. What is the clinic's retained percentage for?
Where the associate is genuinely a contractor and the clinic keeps a share of collections, the question is what that share buys. If the facts or the agreement make it payment for use of the room, the equipment, the staff and the administration, the CRA can treat it as consideration for a taxable supply by the clinic to the practitioner — and HST applies to it, even though everything the patient paid for was exempt.
This is the most common unrecognised HST liability in multi-practitioner clinics, it accumulates quietly, and it turns entirely on how the agreement is written. It is far cheaper to have the wording reviewed before it is signed than to argue about it three years later. The same issue in a dental setting is set out in the associate dentist guide.
What we ask to see
The associate agreements, the fee-split calculation as it is actually run, and one month of practitioner payouts.
Between those three, the classification question and the HST question usually answer themselves — and if there is a gap between the agreement and the practice, it shows up in the payout sheet rather than the contract.
Payroll
Once there are employees, three separate accounts follow.
-
CRA source deductions
Income tax, CPP and EI withheld and remitted on your assigned schedule, with T4s by the end of February. Reception, assistants and administrative staff are employees in almost every clinic, whatever the practitioners are.
-
Employer Health Tax
Ontario exempts the first CA$1 million of payroll for eligible private employers, with the exemption shared across an associated group and unavailable once that group's Ontario payroll passes CA$5 million. Above the exemption the top rate is 1.95%. Monthly instalments start once payroll passes CA$1.2 million, and the annual return is due March 15. Clinic owners who run more than one corporation are the ones who get caught here, because the exemption is shared, not multiplied.
-
WSIB
Not every business has to carry it, and the line does not follow the profession. Ontario's coverage regulation puts health care services provided in a private practice outside compulsory coverage — but only where the practice employs no non-ancillary health care workers, employs nobody doing laboratory work, and engages in no retailing activity. Veterinary services sit outside compulsory coverage on the same by-application basis. Most clinics fail one of those tests: an employed clinician, in-house lab work, or a retail shelf or dispensary each pull the practice back into mandatory coverage, while reception and administrative staff on their own do not. Check your own status with the WSIB rather than going by what a colleague in solo practice pays.
Bookkeeping
The volume is the job.
A clinic generates more transactions in a month than most businesses of the same revenue generate in a quarter, and almost none of them arrive as a clean deposit. The work is reconciling what the practice-management system says was billed against what actually reached the bank.
- Insurer remittances. Direct-billing payments land as lump sums covering many patients, net of processing fees, days after the appointment. They have to be broken back down, or the revenue and the receivable never agree.
- Patient portions and co-pays. The remainder collected at the desk, by a different method, sometimes on a different day.
- Prepaid packages and gift certificates. Money received before the treatment is delivered is deferred revenue, not income, and clinics that sell blocks of visits routinely overstate a good month.
- Refunds, write-offs and insurer clawbacks. Netted against revenue in the practice software, which is why the software's totals rarely tie to the deposits without work.
- Product and drug inventory. For dispensing, retail and veterinary practices, a real inventory count and cost of goods sold — with expiry and shrinkage written off — rather than expensing purchases as they are bought.
- Practitioner payouts. Reconciled to the fee split as agreed, which is also where a classification problem first becomes visible.
Books are kept in whatever system suits the practice, and the reconciliation is the part that matters. Getting it right monthly is what makes the HST allocation defensible at year end, because the split is calculated from figures that were already correct rather than reconstructed in March.
What a clinic gets from us
Monthly bookkeeping reconciled to the practice-management system, not just to the bank.
HST returns with a written allocation method kept on file and applied consistently.
Payroll including source deductions, EHT and the WSIB reporting.
Corporate and personal tax for the clinic and its owners, planned together rather than filed separately.
Fees are quoted up front, and they are based on the transaction volume and the number of practitioners rather than on revenue.
Quick answers
What clinic owners ask us.
Do chiropractors charge HST in Ontario?
Not on chiropractic treatment, which is exempt. The clinic's other revenue is a separate question. Supplements and off-the-shelf products are taxable, reports written for insurers or lawyers are taxable, massage therapy by a registered massage therapist is taxable, and custom orthotics are zero-rated rather than exempt. A clinic selling any of these needs to look at the CA$30,000 threshold on that revenue alone.
Does an optometry practice have to register for HST if eye exams are exempt?
Usually yes, because of the dispensary. Eyeglasses and contact lenses supplied under the authority of a prescription, or of an assessment record produced by someone the province authorises to produce one, are zero-rated, and zero-rated sales count toward the CA$30,000 registration threshold in a way exempt services do not. Registration is also usually to the practice's advantage, because zero-rated sales carry full input tax credits on the eyewear inventory, the lab bills and a share of the overhead.
Do psychologists and psychotherapists charge HST?
Generally no. Services of psychologists and psychological associates were already exempt, and counselling therapy and psychotherapy became exempt on June 20, 2024, where the practitioner meets the Act's test. In Ontario that means CRPO registration for psychotherapy; Ontario does not regulate counselling therapy as a profession of its own, so a counselling therapist here has to show qualifications equivalent to those required in a province that does. The service also has to fall within the practitioner's scope of practice and be provided for health care purposes. Assessments and reports prepared for a court, an insurer, an employer or a school board are generally taxable, as are workshops and training.
Are veterinary services HST-exempt?
No. The health care exemption applies to services rendered to people, so a veterinary practice is fully taxable on consultations, surgery, drugs, food and boarding at 13% in Ontario. The upside is that a fully taxable business recovers input tax credits on essentially all of its costs, including equipment and drug purchases, which is a material recovery that under-claiming practices miss.
Is a clinic associate an employee or an independent contractor?
The CRA decides on the facts of the relationship rather than the wording of the agreement: control over schedule and treatment decisions, who provides the room, equipment and staff, and who carries the financial risk. Ontario's Employment Standards Act separately prohibits misclassification outright, and it is no defence that the practitioner preferred to be treated as a contractor. The agreement and the day-to-day reality have to match.
Can a clinic claim input tax credits if most of its revenue is exempt?
Only on the commercial-activity share. Where an input is used 90% or more in making taxable or zero-rated supplies you claim all of it, where it is 10% or less you claim none, and in between you apportion on a basis that is fair and reasonable and used consistently through the fiscal year. Square footage, appointment counts and revenue share are all workable; a method that changes part-way through the year is the one that draws an assessment.
Do you work with clinics outside Mississauga?
Yes. The firm is in Mississauga and works remotely with clinics across Ontario and the rest of Canada. Documents come through a secure portal rather than email, and most of the year runs by phone and email.
General information drawn from the CRA's guidance on qualifying health care supplies (policy P-256), the notice on psychotherapy and counselling therapy services, Schedule VI to the Excise Tax Act on zero-rated medical and assistive devices, the memorandum on calculating input tax credits, Ontario's Employer Health Tax rules and the WSIB coverage regulation (O. Reg. 175/98) — not advice for your situation. Figures and rules change; check before you rely on them. See also physicians and medical corporations, associate dentists and incorporation.
Running a clinic in Ontario?
Call 647-870-8498 or email info@ghayurtax.com. Send last year's return and a month of practitioner payouts, and you get a straight read on the HST position and a fixed quote before anything starts.