Ontario Budget Report 2019

Ontario Budget Report 2019

Ontario Budget Report 2019

“Protecting What Matters Most”

On April 11, 2019 Ontario’s Finance Minister Victor Fedeli tabled the province’s budget on April 11. 

As expected, the budget includes a range of cost-cutting measures to help move the province towards a balanced budget but also introduced key spending initiatives.

The budget focused on 4 key initiatives:

  1. Deficit reduction
  2. Child-care support
  3. Education and Healthcare
  4. Transit

Deficit Reduction

This budget sets out a five-year path to a balanced budget. 

Currently, Ontario has a deficit of $11.7 billion forecast for 2018-19.  It is anticipated there will be a deficit of $10.3 billion in 2019-20 followed by deficits of $6.8 billion and $5.6 billion in each of the following fiscal years, with a long-term plan to return to balance by 2023-24.

Child-Care Support

The government has proposed new child care support with the introduction of the Ontario Childcare Access and Relief from Expenses (CARE) tax credit. The CARE credit would target relief to eligible families with income up to $150,000.

In addition, the government will commit up to $1 billion over the next 5 years to create up to 30,000 child care spaces in schools.

Education and Healthcare

The budget highlighted a number of education and healthcare initiatives.  

The government will accelerate the development of 30,000 long-term care beds and deliver on mental health and addictions supports, as well as introduce a new publicly funded dental care program for low-income seniors.

On the education front, the government developed a plan entitled “Education that Works for You” with various reforms, and a particular emphasis on math, science and financial literacy as well as skilled trades.

Transit

The government has committed $11.2 billion, of a total estimated cost of $28.5 billion, to support a public transit expansion plan for the Greater Toronto Area.

Highlights

  • Deficit of $11.7 billion now forecast for 2018‑19
  • Balanced budget by 2023-24
  • New CARE tax credit to reduce child care costs
  • Estate Administrative Tax relief

Personal Tax Measures

Person Income Tax Rates

The budget does not include any changes to personal income tax rates.

As a result, Ontario’s provincial personal income tax rates is as follows:

2018/2019 Ontario Personal Tax Rates

Brackets

2018 Tax Rate

Brackets

2019 Tax Rates

$0 to 42,960

5.05%

$0 to 43,906

5.05%

$42,960 to 85,923

9.15%

$43,906 to 87,813

9.15%

$85,923 to 150,000

11.16%

$87,813 to 150,000

11.16%

$150,000 to 220,000

12.16%

$150,000 to 220,000

12.16%

Over $220,000

13.16%

Over $220,000

13.16%

For taxable income in excess of $150,000, the 2019 combined federal–Ontario personal income tax rates are outlined below.

Bracket

Ordinary income*

Eligible dividends

Non-eligible dividends

$150,001 to $210,371

47.97%

31.67%

41.00%

$210,372 to $220,000

51.97%

37.19%

45.60%

Above $220,000

53.53%

39.34%

47.40%

* The rate on capital gains is one-half the ordinary income tax rate

  • There is a 20% surtax on basic Ontario tax between $4,741 and $6,067, and a 56% surtax on basic Ontario tax in excess of $6,067 included in the above rates.
  • Individuals resident in Ontario on 31 December 2019 with taxable income in excess of $20,000 pay the Ontario Health Premium (OHP). The OHP is not included in the rates above.

Ontario Childcare Access and Relief from Expenses (CARE) Tax Credit

Ontario is proposing to introduce a new refundable credit, the CARE credit, for low- and moderate-income families. The CARE tax credit will take effect for 2019 and later taxation years.

Eligible families will receive a credit up to a maximum of 75% of eligible child care expenses, providing a maximum credit each year of:

  • $6,000 per child under the age of 7
  • $3,750 per child between the ages of 7 and 16
  • $8,250 for each child with a severe disability

The CARE credit will be available in addition to the current child care expense deduction.

For purposes of the CARE credit, “eligible child care expenses” is defined as the taxpayer’s total entitlement under the child care expense deduction.

The applicable credit rate will be determined by the amount of family income (as determined for purposes of the child care expense deduction).

The maximum rate of 75% will apply where family income does not exceed $20,000. This rate will decline to the extent family income exceeds $20,000 and the CARE credit will be phased out completely when family income exceeds $150,000.

Details of the calculation of the CARE credit rate with examples are set out in the Table below:

Ontario CARE Tax Credit Rate Calculation and Examples

CARE Tax Credit Rate Calculation

Examples

Family Income

Rate Calculation

Family Income

Ontario CARE Tax Credit Rate

Up to $20,000

75%

$10,000

75%

Greater than $20,000 and up to $40,000

75% minus 2% for each $2,500 (or part thereof) above $20,000

$25,500

69%

Greater than $40,000 and up to $60,000

 

59% minus 2% for each $5,000 (or part thereof) above $40,000

$45,500

55%

Greater than $60,000 and up to $150,000

 

51% minus 2% for each $3,600 (or part thereof) above $60,000

$95,000

31%

Greater than $150,000

 

0%

$150,000

0%

For example, in the 2019 taxation year, Jennifer’s income is $50,000 and her husband Neal’s income is $45,000. In 2019, they incurred $9,600 in child care expenses in respect of their two-year-old child. Neal, the lower-income earning spouse, is entitled to claim a child care expense deduction of $8,000 in respect of their expenses. 

Based on their family income of $95,000, Neal may claim a CARE credit of $2,480, equal to the $8,000 entitlement under the child care expense deduction multiplied by the applicable rate of 31% for that level of family income.

For each of the 2019 and 2020 taxation years, the CARE credit will be claimed on the taxpayer’s income tax return (generally, on the lower income-earning spouse’s or partner’s return, as per the child care expense deduction).

As of the 2021 taxation year, families will have the option to either apply for regular advance payments throughout the year or receive a single payment upon filing their tax returns after the year ends.

Personal Tax Credits For 2019

The maximum tax credit amounts and actual Ontario tax credits for 2018 and 2019 are set out below.

Ontario Non-Refundable Tax Credits

 

2018

2019

Maximum Amount

Ontario Tax Credit

Maximum Amount

Ontario Tax Credit

Basic Personal Amount

$10,354

$523

$10,582

534

Spousal Amount

8,792

444

8,985

454

Eligible dependent amount

8,792

444

8,985

454

Age amount

5,055

255

5,166

261

Canada Caregiver Amount

4,881

246

4,987

252

CPP Contributions

2,594

131

2,749

139

EI Contributions

858

43

860

43

Pension income amount

1,432

72

1,463

74

Disability amount

8,365

422

8,549

432

Disability supplement

4,879

246

4,986

252

Tuition and education amounts

Variable

Variable

Variable

Variable

Adoption expenses (max)

12,632

638

12,910

652

Medical expenses

N/A

Variable

N/A

Variable

Medical expenses (other dependents)

12,632

Variable

12,910

Variable

Interest on student loans

Variable

Variable

Variable

Variable

Donations & Gifts
-first $200
- over $200


200
75% of income


10.10
Variable


200
75% of income


10.10
Variable

In general, credits are multiplied by 5.05% to arrive at the deduction from Ontario Tax.  In the case of donations and gifts over $200, the credit is 11.16% in 2018 and proposed to increase to 17.50%

Estate Administration Tax

Estate Administration Tax is charged on the value of an estate certificate is issued. 

The budget proposes to provide tax relief by eliminating the tax on the first $50,000 of the value of the estate and reducing the tax by $250 for larger taxable estates. 

The Estate Administration Tax would continue to apply to the value of the estate exceeding $50,000 based on the current rate of $15 for every $1,000, or part thereof, of the value of the estate exceeding $50,000. 

This change would apply if an estate certificate is requested after December 31, 2019.

In addition, Ontario announced that it intends to extend the deadline for filing an Estate Administration Tax Information Return with the Ministry of Finance.

It is proposed that the deadline will be extended from 90 days to 180 days after an estate certificate is issued. In the case of an amended Information Return, the government intends to extend the deadline from 30 days to 60 days. 

These changes will take effect January 1, 2020.

The government will also propose clarifying legislative amendments to the Estate Administrative Act, 1998 related to refunds of overpayments of the Estate Administration Tax.

Corporate Tax Measures

Corporate Tax Rates – No changes

Ontario’s 2019 budget has not changed the province’s corporate tax rates. The combined federal and Ontario corporate income tax rates will be as follows:

 

2019

Ontario

Federal and
Ontario Combined

Small business rate *, **

3.50%

12.50%

Manufacturing & Processing

10.00%

25.00%

General Corporate rate

11.50%

26.50%

* On the first $500,000 of active business income. The small-business rate is prorated based on a 31 December year-end.
** The federal small-business rate is reduced from 10% to 9.0% effective 1 January 2019.

Cultural Media Tax Credit Certification

Ontario currently offers 5 refundable income tax credits for the cultural media sector:

  1. Ontario film and television tax credit
  2. Ontario production services tax credit
  3. Ontario computer animation and special effects tax credit
  4. Ontario interactive digital media tax credit (OIDMTC)
  5. Ontario book publishing tax credit

The government announced that it will review the cultural media tax credit certification process in an effort to streamline administration, reduce the tax credit application backlog, and reduce wait times for tax credit certification.

Ontario Interactive Digital Media Tax Credit (OIDMTC)

The Ontario Interactive Digital Media Tax Credit is a refundable tax credit available to qualifying corporations for expenditures related to eligible interactive digital media products.  

The OIDMTC offers four streams for different types of products and companies, including a specialized digital game corporation stream, for purposes of eligibility for this credit.  

Currently, a company must spend a minimum of $1 million on Ontario labour expenditures for eligible digital games in its taxation year to qualify as a specialized digital game corporation.  

Ontario is proposing to reduce the labour expenditure threshold from $1 million to $500,000. This measure would take effect for taxation years commencing after 11 April 2019.

Ontario Job Creation Investment Incentive

The budget proposes the Ontario Job Creation Investment Incentive to parallel the immediate write-off measures and the Accelerated Investment Incentive announced by the federal government in November 2018.  The measures include:

  • The immediate write-off of manufacturing and processing machinery and equipment and specified clean energy equipment
  • The Accelerated Investment Incentive that applies to most other capital assets and provides a depreciation rate of up to three times the normal rate in the first year the asset is put into use.

These measures are in place for assets acquired after November 20, 2018 and will be phased out from 2024 to 2027.

Other Measures (Not Related to Income Tax)

Taxation of Cannabis Products

Ontario intends to introduce the Cannabis Taxation Coordination Act, 2019, which would ratify Ontario’s Coordinated Cannabis Taxation Agreement.

Carbon Tax

Ontario restated its intention to challenge the imposition of the federal carbon tax in court. 

As well, the province proposes to introduce the Federal Carbon Tax Transparency Act, which would require consumers to be informed of the impact of the federal carbon tax on gasoline prices at the point of sale.

Tax Evasion and Avoidance

In an effort to address tax loopholes and reduce tax evasion, Ontario has created a specialized unit of tax experts who are working with federal and provincial tax officials.

Tobacco Tax

Ontario announced proposed amendments to raw leaf tobacco provisions in the Tobacco Tax Act would establish new penalty and offence provisions relating to the:

  • Use of new track and trace bale markers issued by the Ministry of Finance
  • Failure to notify the minister of the destruction of raw leaf tobacco

Additional tobacco tax amendments would:

  • Remove “baling and packaging” from the definition of producing tobacco and require any raw leaf tobacco certificate to permit baling and packaging
  • Clarify provisions relating to permits

Gasoline Tax

Ontario announced that the Gasoline Tax Act will be amended to clarify that the Act authorizes the prescribing of requirements for on-reserve retailers in the gasoline tax refund process on sales to First Nations consumers.

Recently Enacted Tax Measures

The 2019 budget summarized the following measures announced in the Ontario 2018 fall economic statement:

  • Introduction of the non-refundable low-income individuals and families tax (LIFT) credit, effective for 2019 and later taxation years. The LIFT credit provides a maximum credit of $850 for a single individual and $1,700 for couples if certain conditions are met (e.g., the individual must have employment income).
  • Amendments to ensure that Ontario does not parallel the federal measure that phases out the $500,000 small business deduction for a Canadian-controlled private corporation (and any associated corporations) earning between $50,000 and $150,000 of passive investment income in the previous taxation year.
  • Extension of certain tax relief measures to encourage private sector development in the Ontario electricity distribution sector, such as reducing transfer tax rates and exempting capital gains arising under the payments in lieu of taxes (PILs) deemed disposition rules. These measures, which were scheduled to expire on 31 December 2018, have been extended to 31 December 2022. The 2019 budget announced that to help electricity rate reduction initiatives, Ontario will use any transfer tax collected for electricity rate relief.
  • Providing a property tax exemption for Ontario branches of the Royal Canadian Legion.

How Ontario Compares

The following chart compares top personal and corporate tax rates and sales taxes for all provinces and territories, as announced to April 11, 2019.

 

 

2019 Corporate Tax Rates

 

 

Top 2019 Personal Rates

General
%

M&P
%

Small Business
%

2019 Prov. Sales Tax

B.C.

49.80

27.00

27.00

11.00

7.00

Alta.

48.00

27.00

27.00

11.00

-

Sask.

47.50

27.00

25.00

11.00

6.00

Man.

50.40

27.00

27.00

  9.00

8.00(1)

Ont.

53.53

26.50

25.00

12.50

8.00(2)

Qué.

53.31

26.60

26.60

15.00(3) 

9.975(4)

N.B.

53.30

29.00 

29.00

11.50

10.00(2)

N.S.

54.00

31.00

31.00

12.00

10.00(2)

P.E.I.

51.37

31.00

31.00

12.50

10.00(2)

N.L.

51.30

30.00

30.00

12.00

10.00(2)

Yukon

48.00

27.00

17.50

11.00(5)

-

N.W.T.

47.05

26.50

26.50

13.00

-

Nunavut

44.50

27.00

27.00

13.00

-

  1. The Manitoba retail sales tax rate will decrease from 8% to 7% on July 1, 2019.
  2. As part of the HST (combined rates are 15% in New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland & Labrador and 13% in Ontario).
  3. Quebec’s small business rate for small and medium-sized businesses (SMB’s) is 6% in 2019. Quebec provides a rate reduction from the small business rate for businesses in the manufacturing or primary (MOP) industries.  Where certain conditions are met, an additional reduction of 2% is available, resulting in a combined rate of 13% for qualifying businesses.  Note that a lessor reduction from the small business rate may be available to certain SMB’s in the MOP sector where some, but not all conditions are met.
  4. The QST system is harmonized with the GST, though two separate tax systems remain – the GST and the amended QST. The combined rate is 14.975%.
  5. The tax rate for M&P profits eligible for the small business deduction is 10.5%.

(Source: Ontario Government)

“It’s pointless to set goals if you are not going to try to hit them.” — Don Connelly