Ontario Finance Minister Rod Phillips tabled the 2020 Ontario Budget, Ontario’s Action Plan: Protect, Support, Recover. The government projects a deficit of $38.5 billion for 2020-2021, which is unchanged from the deficit forecast in the 2020-2021 First Quarter Finances presented March 25. The government is forecasting declining deficits of $33.1 billion in 2021-2022 and $28.2 billion in 2022-2023. The government plans to table a multi-year plan, including a path to balancing the budget, in the 2021 Budget by March 31, 2021.
Several tax measures were announced in the budget, which are summarized below.
Employer Health Tax
In March 2020, the government temporarily increased the employer health tax (EHT) exemption from $490,000 to $1 million for 2020. The budget proposes to make this increase permanent. This increase provides up to $9,945 in annual savings per employer.
Currently employers with annual Ontario payroll over $600,000 must pay their EHT liability in monthly installments. The budget proposes to double this threshold to $1.2 million, beginning in 2021.
Seniors’ Home Safety Tax Credit
The budget proposes to introduce a temporary seniors’ home safety tax credit for 2021. The credit will be refundable and have no dependence on the taxpayer’s income. Expenses are eligible to the extent that they relate to renovations that improve safety and accessibility or help a senior be more functional or mobile at home. Eligible expenses must be paid or become payable in 2021, and 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 refundable credit is equal to 25% of up to $10,000 in eligible expenses for a senior’s principal residence in Ontario. The $10,000 limit must be shared by people who share a home. Individuals can claim the credit if the improvement was made to their principal residence or a residence that they reasonably expect to become their principal within 24 months after the end of 2021. Taxpayers should obtain receipts from suppliers and contractors to support their tax credit claim.
Cultural Media Tax Credit Eligibility
To help the cultural industries deal with pandemic-related disruptions, the province is proposing to temporarily extend various timelines and amend some requirements for the cultural media tax credits. See Table A.1 in Annex: Details of Tax Measures and Other Legislative Initiatives for a complete list of the changes to timelines.
Research and Development
The government proposes to extend the reporting period to claim the Ontario research and development tax credit. This extension will parallel the extension of the reporting deadline for federal SR&ED purposes. Corporations with tax year-ends from September 13, 2018 to December 31, 2018 will have an additional six months to file a claim. Corporations with tax year-ends from January 1, 2019 to June 29, 2019 will have until December 31, 2020 to file a claim.
The government plans to reduce all business education tax (BET) rates throughout the province to 0.88% for both commercial and industrial properties beginning in 2021.
The government also plans to provide municipalities the flexibility to target property tax relief for small businesses beginning in 2021. The government will also consider matching these property tax reductions.
While the province is currently conducting a review of its property tax and assessment system, the budget includes two proposed measures based on feedback. First, the government will introduce new assessment tools for areas experiencing high demand for redevelopment. Second, the province plans to enhance the accuracy and stability of the assessment methodologies.
Wine and Beer Taxes
The government is freezing beer tax rates until March 1, 2022. It is also proposing to retroactively cancel the increase to wine basic tax rates that were scheduled to occur on June 1, 2020.
Other Technical Amendments
The budget proposes technical amendments to the Taxation Act, 2007 that would ensure that:
• individuals continue to have the right to appeal the amount of Ontario trillium benefit, Ontario sales tax credit, Ontario energy and property tax credit, or northern Ontario energy credit that they are entitled to receive;
• the adoption expenses tax credit can continue to be used in calculating the amount of tax payable by the spouse or common-law partner, when determining the amount of tax credits that can be transferred to a taxpayer from their spouse or common-law partner;
• the low-income individuals and families tax credit (LIFT) continues not to affect the calculation of the Ontario surtax; and
• the community food program donation tax credit for farmers continues to be the last tax credit to apply in calculating an individual’s Ontario income tax.
A technical amendment to the Municipal Property Assessment Corporation Act, 1997 would ensure continued administrative efficiency in the provision of assessment information.