On November 5, 2020, Ontario Minister of Finance Rod Phillips announced the province’s 2020 Budget. Highlights of the tax measures in the 2020 Budget are discussed below:
CORPORATE TAX MEASURES
Corporate Income Tax Rates
Corporate income tax rates in 2020 will remain the same. The general and small business corporate income tax rates federally and in Ontario are as follows:
|Income eligible for Small Business Deduction (CCPCs up to $500K)||General Income|
Employer health tax (EHT)
Ontario’s EHT is a payroll tax based on total annual Ontario remuneration. The EHT rates vary from 0.98% of payroll under $200,000, up to 1.95% for payroll in excess of $400,000.
For 2019, employers with total annual Ontario remuneration of less than $5 million were eligible for an EHT exemption on payroll up to $490,000. As part of Ontario’s Action Plan during the COVID-19 pandemic, this exemption was increased to $1 million for 2020. The government is proposing to make this $1 million EHT exemption permanent.
Currently, employers with annual Ontario payroll over $600,000 have to make monthly EHT instalments. The government is proposing to double this threshold payroll amount to $1.2 million, beginning in 2021.
Ontario Research and Development Tax Credit (ORDTC)
Qualifying corporations can claim a tax credit on eligible scientific research and experimental development expenditures in Ontario. The Budget extends the reporting period to claim an ORDTC to the earlier of:
- Six months after standard deadline; and
- December 31, 2020.
This would parallel the extension of the reporting deadlines for federal Scientific Research & Experimental Development claims.
PERSONAL TAX MEASURES
Personal Tax Rates
The personal tax rates remain the same as announced in this year’s budget. The top combined federal-Ontario marginal tax rates are as follows:
|Type of Income||Combined Federal & Ontario Rate|
|Eligible Canadian dividends||39.34%|
|Non-eligible Canadian dividend||47.74%|
Senior’s Home Safety Tax Credit (SHSTC)
The 2020 Budget proposes a temporary refundable Seniors’ Home Safety Tax Credit for eligible claimants who make improvements to a senior’s principal residence in Ontario to facilitate safety and accessibility. The SHSTC will provide a tax credit of 25% on up to $10,000 of eligible expenses, for a maximum credit of $2,500. The new credit can be claimed by senior homeowners, renters or people who live with relatives who are seniors, including spouses and common-law partners. This credit is not dependent on income.
To qualify for this credit, all expenses have to be paid or become payable in 2021. Eligible expenses would include:
- Renovations to permit a first-floor occupancy or secondary suite for a senior;
- Grab bars and related reinforcements around the toilet, tub and shower;
- Wheelchair ramps, stair / wheelchair lifts and elevators;
- Non-slip flooring;
- Additional light fixtures throughout the home and exterior entrances;
- Automatic garage door openers; and
- Modular or removable versions of a permanent fixture, such as modular ramps and non-fixed bath lifts.
The credit can be claimed if the improvement was made to a principal residence, or to a residence that is reasonably expected to become a senior’s principal residence within 24 months after the end of 2021.
To claim the tax credit, seniors or their family members should get receipts from contractors and suppliers, helping to ensure that vendors report these amounts for tax purposes as well.
To support Ontario’s tourism sector, the government is exploring ways to provide Ontario residents with support of up to 20% for eligible Ontario tourism expenses to encourage them to discover Ontario in 2021 (when public health experts advise that it is safe to do so). Further details will be announced later this year.
The Ontario Government plans to provide municipalities tools for providing targeted tax relief to small businesses. Beginning in 2021, the Budget proposes to:
- Reduce the highest Business Education Tax rates for employers across Ontario to 0.88% for commercial and industrial properties; and
- Permit municipalities to:
- adopt a new optional property subclass for small business properties; and
- reduce property taxes to eligible small business properties.
In addition, the province will also consider matching municipal property tax reductions to provide further support to small businesses.
Wine Tax and Beer Tax Rate
The provincial government will be freezing the beer tax rates until March 1, 2022 and is proposing to cancel retroactively the scheduled increase in wine basic tax rates that was to occur on June 1, 2020.