Tax & Accounting November 15, 2018

2018 Ontario economic outlook and fiscal review

On November 15, 2018, the Ontario government presented its 2018 Economic Outlook and Fiscal Review: A Plan for the People. A handful of tax-related announcements were made. These are discussed below.

New non-refundable Low Income Individuals and Families Tax (LIFT) credit

Beginning in 2019, this credit would eliminate or reduce Ontario Personal Income Tax for low-income Ontario taxpayers who have employment income. The proposed tax credit is calculated as the lesser of $850 and 5.05% of employment income, and is reduced by 10% of the greater of (i) adjusted individual net income in excess of $30,000, and (ii) adjusted family net income in excess of $60,000. The resulting amount is limited to the taxpayers provincial income tax otherwise payable, excluding the Ontario Health Premium.

Employer Health Tax

As of January 1, 2019, the EHT exemption will increase from $450,000 to $490,000.

Extension of time-limited tax relief for the electricity distribution sector

Ontario is extending the tax relief on the sale of electricity assets by municipalities to the private sector to December 31, 2022. Also, for transfers of electricity assets occurring between January 1, 2019 and December 31, 2022, the Transfer Tax rate will be reduced from 33% to 22%, and the rate will be zero for transfers by municipal electricity utilities with fewer than 30,000 customers. Any capital gains arising under the payment in lieu of taxes (PILs) deemed disposition rules will be exempt from PILs.

Property tax exemption for Royal Canadian legion

The government is going to propose that, starting in 2019, branches of the Royal Canadian legion be exempt from property tax, province-wide.

2018 budget announcements not being implemented

The Ontario government will not be moving forward with the following 2018 Ontario Budget proposals:
  • Adjustments to the rates, brackets, surtax and credits for the Ontario Personal Income Tax
  • Amendments to parallel the federal measure to phase out the small business limit for passive investment income over $50,000 earned in a taxation year
  • Changes to the Ontario Research and Development Tax Credit and the Ontario Innovation Tax Credit that would have linked a corporation’s tax credit rate to the level of its investment in research and development
  • Measures to target the Employer Health Tax exemption

Technical amendments

The Ontario government is proposing technical amendments to:
  • Adjust the non‐eligible dividend tax credit calculation to maintain the rate at 3.2863% (Taxation Act, 2007)
  • Parallel a federal change that allows payers of the tax on split income to apply the disability tax credit against that tax (Taxation Act, 2007)
  • Parallel a federal change modifying the pension income tax credit to take into account additional federal veterans’ benefits (Taxation Act, 2007)
  • Remove reference to the Canadian Red Book and the Canadian Older Car/Truck Red Book R.R.O. 1990, Regulation 1012 made under the Retail Sales Tax Act)
  • Remove a spent provision that provided one - time support to businesses during the transition to Harmonized Sales Tax in 2010 (Retail Sales Tax Act)
  • Amend certain regulations to replace outdated references to Goods and Services Tax and Retail Sales Tax with the term Harmonized Sales Tax
Cameron Mancell
CFP®, Senior Technical Writer at Wolters Kluwer Canada
Cameron Mancell, CFP®, is a Senior Technical Writer at the Wolters Kluwer office in Toronto. Cameron contributes to Canadian Tax Reporter, Preparing Your Income Tax Returns, and Preparing Your Corporate Income Tax Returns, among several others.
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