FBC – Canada's Small Business Tax Specialist

On March 29, 2011, Ontario’s Government handed down a budget that forecasts a deficit of $16.7 billion for 2010-2011, a reduction of $3 billion from the 2010 budget prediction. The budget continues to forecast declining annual deficits until a balanced budget is reached by 2017-2018. 

The budget offered no new personal or corporate tax hikes or cuts and just a few spending initiatives for health care and education.  The following is a summary of the few tax-related and agriculture sector measures contained in the budget.

Personal Tax Changes

New Ontario Trillium Benefit- The budget proposes to introduce a new Ontario Trillium Benefit (OTB), which would combine payments of three existing refundable tax credits, the Ontario Sales Tax Credit (OSTC), the Ontario Energy and Property Tax Credit (OEPTC), and the Northern Ontario Energy Credit (NOEC), into one monthly benefit payment.  Currently, the OSTC, OEPTC and NOEC are paid quarterly, rather than one lump sum. Beginning in July 2012, the Budget proposes to take the next step and combine these payments into one monthly OTB payment amount.

Child Benefits Consolidated– The Ontario Child Care Supplement for Working Families (OCCS) payments will be consolidated with Ontario Child Benefit (OCB) payments, on a per child basis. Where a family’s OCCS entitlement is higher than its OCB benefit, the family would continue to receive the extra OCCS benefit amount for each child under the age of seven.

Other Changes

New and Extended Risk Management Programs (RMP) for Agriculture – The existing RMP that has been a pilot program for grain and oilseed producers since 2007 will become a permanent program  The province also announced the start up a new RMP for cattle, hog, sheep and veal producers to help producers in this sector manage risk from volatile commodity prices.  Based on the existing program for grains and oilseeds, the new program will provide price insurance to compensate these livestock producers when prices decline well below production costs.  A new Self-Directed Risk Management Program (SDRM) will also be implemented for the edible horticulture sector.  The cost of these programs will be shared between the Ontario government and producers.

Ontario– Phased-in Measures (previously announced)

Labour Sponsored Investment Funds (LSIFs) (September 30, 2005) – The Ontario government announced that it plans to eliminate its provincial 15% tax credit for investors in LSIFs by the end of the 2010 taxation year.  The credit will remain at 15% until the 2008 taxation year and will be reduced to 10% for the 2009 taxation year and 5% for the 2010 taxation year.  The 5% incremental tax credit offered for Research Oriented Investment Funds (ROIF) would be phased out on the same timetable.  The federal government continues to offer its own 15% tax credit for labour-sponsored venture capital corporations.  [Note:  The Ontario government announced a one-year extension of the elimination of the LSIF tax credit to the end of the 2011 tax year – see the “December 13, 2007 Ontario Economic Outlook and Fiscal Review” below.]

 Labour Sponsored Investment Funds (LSIFs) (Ontario Economic Outlook and Fiscal Review -December 13, 2007) -  The phase-out of the Labour Sponsored Investment Fund (LSIF) Tax Credit will be extended by one year to the end of the 2011 taxation year, and the maximum qualifying investment will be increased to $7,500 from $5,000 for 2007 and later years . The 15% (20% for ROIF funds) tax credit rate will be maintained until the end of 2009 (this implies a maximum credit of $1,125 on ordinary LSIF investments and $1,500 for ROIF investments for 2007 to 2009). The rate will be lowered to 10% for 2010 and 5% for 2011 and the tax credit will be eliminated for tax years after 2011.

Ontario Tax Exemption for Commercialization (OTEC) (2008 Ontario Budget) – The government is proposing a ten-year tax exemption from Ontario corporate income tax and corporate minimum tax for new corporations that commercialize intellectual property developed by qualifying Canadian universities, colleges or research institutes.  The OTEC is available to qualifying corporations established after March 24, 2008 and before March 25, 2012, incorporated in Canada and that derive all or substantially all of their income from eligible commercialization activities carried on in Canada.

OntarioInteractive Digital Media Tax Credit (OIDMTC) (2008 Ontario Budget) – The OIDMTC provides a refundable tax credit for eligible expenditures made in the creation, marketing and distribution of interactive digital media.  The budget proposes to enhance the OIDMTC and extend the time period for qualifying expenditures.  The general tax credit rate for corporations that do not qualify for the special small business tax credit rate and for fee-for-service work, will be increased from 20% to 25%, effective for qualifying expenditures incurred after March 25, 2008 and before January 1, 2012.  The enhanced tax credit rate of 30% for eligible small business corporations will be extended from the end of 2009 to qualifying expenditures incurred before January 1, 2012.  Also, the eligibility period for qualifying labour expenditures will be extended from two to three years for products completed after March 25, 2007.   

New Ontario Sales Tax Transition Benefit (2009 Ontario Budget) – Cash payments are being provided to Ontarians to support the transition to the HST.  Benefits under this program are being delivered to eligible Ontario tax filers aged 18 and over in each of June 2010, December 2010 and June 2011.  The government is providing eligible families with an income less than $160,000 with three payments totaling $1,000 ($330 + $335 + $335).  Eligible individuals who earn less than $80,000 get three payments totaling $300.  The maximum benefit is reduced by 5% of the recipients’ previous year’s adjusted family net income over $80,000 for single individuals and over $160,000 for families.

To qualify for the two benefits in 2010, a 2009 tax return must be filed, and a 2010 tax return must be filed for the June 2011 benefit.

Corporate Income Tax Rates (2009 Ontario Budget) – Corporate income tax rates are being reduced, effective July 1, 2010 as follows:

• the general corporate income tax rate is reduced from 14% to 12%;
• the rate on income from manufacturing and processing, mining, logging, farming, and fishing is reduced from 12% to 10%; and
• the small business rate is reduced from 5.5% to 4.5%.

Further reductions in the general corporate tax rate are proposed as follows:

• effective July 1, 2011, the rate is reduced to 11.5%;
• effective July 1, 2012, the rate is reduced to 11%; and
• effective July 1, 2013, the rate is reduced to 10%.

Northern Ontario Energy Tax Credit Introduced (2010 Ontario Budget) – Effective for 2010, the budget introduced a new Northern Ontario Energy Credit to assist low- to middle-income individuals resident in Northern Ontario in recognition of their higher energy costs.  This program provides an annual tax credit of up to $130 for single individuals and up to $200 for families (including single parent families).  These credits are reduced by 1% of income that exceeds $35,000 for single individuals and $45,000 for families.  This means the credits are eliminated when income exceeds $48,000 for singles and $65,000 for families.  Eligible individuals will include those who pay rent or property tax for a principal residence in the district of Algoma, Cochrane, Kenora, Manitoulin, Nipissing, Parry Sound, Rainy River, Sudbury, Thunder Bay or Timinskaming.  The credit will is also available to northern residents who live on-reserve and pay energy costs for their principal residence.

For 2010, eligible northern residents who apply to the Ontario Ministry of Revenue for the credit will receive payment in two installments (November 2010 and February 2011).  For subsequent years, the permanent credit will be paid quarterly, along with the new Ontario Energy and Property Tax Credit (see below) and the application will be part of the personal income tax return.

Ontario Energy and Property Tax Credit Introduced (2010 Ontario Budget) – The Ontario Property Tax Credit is being converted to a new Ontario Energy and Property Tax credit.  Starting in 2011, the credit is being paid quarterly to eligible individuals, based on income tax returns filed for 2010, as is the case of the Ontario Sales Tax Credit. 

Tax Credit details released September 28, 2010:  For non-seniors, a family or single person who owns or rents a home can claim an energy amount of up to $200.  In addition, they can claim a property tax amount of $50 plus 10% of their occupancy cost, to a maximum of $700. (Occupancy cost is equal to the property tax paid and/or 20% of qualifying rent paid during the year.)   The property tax amount cannot exceed occupancy cost.  The maximum energy and property tax amounts that can be claimed is $900.  The total of these amounts is reduced by 2% of adjusted family net income over $20,000 for a single person or over $25,000 for a couple or single parent.

Additional benefits are provided to seniors. In addition to the $200 energy amount, they can claim a property tax amount of $425 plus 10% of their occupancy cost, to a maximum of $825.  The maximum energy and property tax amounts that can be claimed is $1,025.  The total of these amounts is reduced by 2% of adjusted family net income over $25,000 for a single senior or over $30,000 for a senior couple or single parent.

Sales Tax on Insurance Premiums (2010 Ontario Budget)  – Since sales tax on certain types of insurance will be continued under the RST after June 30, 2010, vendors of taxable insurance will continue to be eligible for vendor compensation up to a maximum of $1,500 annually.  For this transitional year, vendors will be eligible to receive up to $375 for the period April 1, 2010 to June 30, 2010, and up to $1,125 for the period July 1, 2010 to March 31, 2011.

Property Tax Relief for Farmers with Farm Bunkhouses (December 13, 2010) – Effective January 1, 2011, Ontario farmers with bunkhouses that house temporary or seasonal workers will pay the farm property tax rate, which is 75% lower than the residential rate.