Case snapshot
At a glance
- Case
- Can CRA Deny CERB If You Paid Yourself Dividends in Ontario?
- Court / Tribunal
- FC
- Citation
- 2026 CF 1129 ↗
- Date
- September 4, 2026
- Area of law
- Litigation Law
- Key issue
- Whether the CRA reasonably and fairly denied CERB for seven periods in 2020 after averaging T5 taxable dividends over 52 weeks and finding income above the $1,000 ceiling per CERB period.
- Outcome
- The Federal Court dismissed the application for judicial review, with no costs. It upheld the CRA second-review denial of CERB (PCU) eligibility and excluded post-decision affidavit exhibits.
- Why it matters
- Small-business owners who paid themselves dividends and later faced a CERB denial or repayment demand need to understand that the fight is often about how income is allocated to each four-week period — and that failing to answer CRA's timing questions can leave the agency free to average the year's dividends.
Legal principle
The rule from this case
CERB eligibility is assessed period by period. Under section 6 of the Canada Emergency Response Benefit Act and the income regulation, a claimant may be ineligible for a four-week period if income for that period is more than $1,000. That ceiling is a separate rule from the $5,000 income floor used to establish program eligibility in the first place. A dividend is not automatically outside CERB. The Federal Court noted that a dividend can be employment or self-employment income for the purposes of paragraph 6(1)(b)(i). The live issue on this record was periodicity and calculation: when the applicant did not say when, how often, or how the 2020 dividends were paid, the CRA spread the T5 total evenly over 52 weeks. That produced weekly income of about $438, which exceeded $1,000 for each four-week CERB period claimed. On judicial review, the court applied Vavilov reasonableness and found the CRA's process met procedural fairness (a reasonable opportunity to be heard, not an unlimited one). Post-decision evidence is generally excluded unless a recognized exception applies.
Important limits
What this does not mean
This decision does not hold that dividends are generally ineligible for CERB, or that the claim failed because the applicant missed the $5,000 eligibility floor. The court was reviewing a second-review calculation on a specific record: $22,774 in 2020 T5 taxable dividends, no timely explanation of payment timing, and a 52-week average that put the applicant over the $1,000 per-period income ceiling for the seven periods from March 15 to September 26, 2020. The ruling also does not mean every CERB dividend file will be decided the same way. An applicant who supplies records showing when dividends were declared and paid might produce a different weekly or period figure. Judicial review remains a reasonableness review of the CRA's decision on the record — not a chance to retry eligibility with new documents created after the fact.
Can CRA Deny CERB After Averaging Dividend Income Across the Year?
Yes — on this record, the Federal Court upheld a CRA second-review denial of Canada Emergency Response Benefit (CERB / PCU) eligibility after the agency averaged 2020 T5 dividends over 52 weeks and found income above the $1,000 ceiling for each four-week period claimed. In Pedneault c. Canada (Procureur général), 2026 CF 1129 (also styled 2026 FC 1129) (CanLII) (read the French full-text decision), Justice Saint-Fleur dismissed the judicial review (docket T-5094-25) and awarded no costs.
The holding is narrower than a rule that dividends do not count. The court noted that a dividend can be employment or self-employment income for CERB. What sank this application was the calculation: without a timely explanation of when and how the dividends were paid, CRA treated them as earned evenly through the year.
What Income Rule Did the CRA Apply?
The applicant had T5 taxable dividends of $22,774 in 2020 from PRODUCTION LA BLOK INC. During the second review, CRA asked when the dividends were paid, how often, and how. Those details were not provided within the deadline.
CRA therefore spread the $22,774 over 52 weeks — about $438 per week. Applied to each four-week CERB period, that figure was more than $1,000. The agency found the applicant ineligible for the seven periods from March 15 to September 26, 2020 under section 6 of the CERB Act and the income regulation.
That is a per-period income ceiling, not a finding that the applicant failed the separate $5,000 eligibility floor. Mixing those two rules is a common source of confusion in CERB commentary, and it is not how this case was decided.
Did the Court Treat Dividends as Automatically Ineligible?
No. The court observed that a dividend can be employment or self-employment income for the purposes of paragraph 6(1)(b)(i) of the CERB Act. The dispute was not a categorical exclusion of T5 income. It was whether, on the information CRA had, the 2020 dividends produced more than $1,000 of income in each claimed period once they were averaged weekly.
Someone who can document a different payment schedule — for example, a single declaration on a particular date — may present a different periodicity case. This file did not, because the requested timing evidence was not supplied in time.
Did CRA Give a Fair Chance to Respond?
The court found that it did. Procedural fairness required a reasonable opportunity to be heard, not unlimited time or repeated follow-ups. Applying Perez principles, the court held that the applicant had a genuine chance to explain the dividend payments and did not do so within the time given. CRA was entitled to proceed on the record it had.
Judicial review of that process is a reasonableness review under Vavilov, not a fresh trial of CERB eligibility. Earlier Federal Court decisions in Girard-Lortie c. Canada (Procureur général), 2025 CF 871, and Cantin c. Canada (Procureur général), 2022 CF 939, were among the authorities the court considered.
Can You File New Evidence on Judicial Review?
Generally, no. The applicant filed an affidavit with exhibits created or obtained after the CRA second-review decision. The court excluded them. The recognized exceptions — including those discussed in Access Copyright, Sharma, and Tsleil-Waututh — were not met. New material that goes to the merits after the fact is not a backdoor to rebuild the administrative record.
If you are considering judicial review of a CRA CERB decision, the documents that matter are the ones that were (or could have been) before the second-review officer.
What Does This Mean for People Facing a CERB Denial or Repayment Demand?
If your 2020 income included dividends and CRA has denied CERB or demanded repayment, the live questions are usually: what did CRA ask, what did you send, and how did it allocate that income to each four-week period? Bank records, corporate resolutions, and T5 slips can all matter — but only if they are in the file in time.
Our Ontario litigation lawyers regularly advise on Federal Court judicial review of administrative decisions, including CRA second-review outcomes. If you are in the Hamilton or Burlington area, our Hamilton litigation team and Burlington litigation team can discuss the specifics of your situation.
Questions and Records to Discuss With a Lawyer
- What documentation do you have showing when dividends were declared and actually paid, and did you give that to CRA during the second review?
- Did you respond to every CRA request for timing, frequency, and method of payment, and do you have copies of those communications?
- How did CRA calculate weekly or period income — including whether it averaged an annual T5 amount over 52 weeks?
- Which CERB periods were denied, and did the reasons turn on the $1,000 per-period ceiling rather than the $5,000 eligibility floor?
- Were any documents you now want to rely on created after the CRA decision was issued?
If you have received a CERB repayment demand or a second-review denial, the specific facts of your file will shape your options. Reach out to UL Lawyers through /connect to discuss your circumstances.
This article is automated commentary on a public court decision and is for general information only — not legal advice. Decisions rely on facts unique to each case. If you are affected by a similar issue, contact a lawyer for advice specific to your situation.
FAQ
Frequently asked questions
You can request a second review through the CRA and, if still unsatisfied, apply for judicial review at the Federal Court. Judicial review is not an appeal on the merits — the court assesses whether the CRA's process and reasoning met the legal standard, not whether it would have reached the same result.
They can. The Federal Court has noted that a dividend may be employment or self-employment income for CERB eligibility. What often decides a file is how the CRA calculates that income over each four-week CERB period — not a rule that dividends are automatically ineligible.
Under the CERB Act and the income regulation, a claimant could be ineligible for a four-week period if income for that period exceeded $1,000. That per-period ceiling is separate from the $5,000 eligibility floor used to enter the program. In Pedneault, CRA averaged 2020 T5 dividends over 52 weeks and found the resulting income was above $1,000 for each of the seven periods claimed.