Tax Alert

2020 Ontario budget summary

On November 5, 2020, Finance Minister Rod Phillips tabled Ontario’s 2020-21 budget (Budget 2020). This is the second budget for the Progressive Conservative government of Ontario, introducing $15 billion of new spending over three years in response to the COVID-19 pandemic. This is in addition to the $30 billion of support previously announced earlier in the year.

There are three pillars to the Ontario government’s budget, which lays out the province’s action plan over a three-year period:

The government also previously introduced cash flow supports for people and businesses totaling $11.3 billion. These supports included measures such as interest and penalty-free deferrals on provincially administered taxes for six months and WSIB premium deferrals.

Over its three-year plan, the government is projecting deficits as follows:

Due to the additional spending this year and forecasted deficits in the next couple of years, Ontario’s debt is projected to grow to almost $480 billion by 2022-23.

Personal measures

Personal income tax rates

No changes to personal income tax rates are proposed. The top combined federal Ontario marginal tax rates for 2020 are as follows:

Seniors’ Home Safety Tax Credit

The government is introducing, for the 2021 tax year, a temporary refundable Seniors’ Home Safety Tax Credit of 25 percent of eligible expenses, up to $10,000 (i.e., maximum credit of $2,500). Senior homeowners and renters, as well as relatives living with seniors, would be eligible to claim the refundable credit on home improvements to make their living space safer and more accessible.

Eligible expenses would include:[1]

  • 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
  • Modular or removable versions of a permanent fixture, such as modular ramps and non-fixed bath lifts

Support for Learners initiative expanded

The Support for Learners initiative was introduced in March as part of the Ontario government’s action plan in response to the pandemic. It provided parents with $200 for each child up to 12 years old and $250 for each child with special needs up to 21 years old.

Budget 2020 will provide a second payment to parents under this program for the same amounts and parameters as the first payment.

Business measures

Corporate tax rates

No further changes to the corporate tax rates or the $500,000 small business limit are proposed. Ontario’s corporate tax rates for 2020 are summarized in the table below:

Ontario corporate tax rates

Employer Health Tax

The Employer Health Tax (EHT) is a payroll tax on Ontario remuneration paid to employees and former employees. Previously, private sector employers with total annual Ontario remuneration of $5 million or less were eligible for an EHT exemption on part of their payroll ($490,000 in 2019).

In March 2020, the government temporarily increased the EHT exemption for 2020 from $490,000 to $1 million as part of their COVID-19 relief measures. The government is proposing to make this increased exemption permanent. The increased exemption results in a $9,945 reduction in EHT premiums annually, for eligible employers.   

Previously, employers with an Ontario payroll over $600,000 had to make monthly EHT installment payments. Budget 2020 proposes that employers with an annual Ontario payroll of $1.2 million or less do not need to make monthly EHT installment payments.

Businesses impacted by Stage 2 (Control or Lockdown) public health restrictions

On October 9, the Ontario government announced that it will provide up to $300 million in relief for eligible business in areas affected by the modified Stage 2 public health restrictions (e.g. Toronto, Ottawa, Peel and York Region).  The funding would be available to help eligible businesses cover fixed costs such as property taxes and energy bills.

Budget 2020 confirms that the government is still committed to provide the $300 million relief. More details will be released when available.

Cultural Media Tax Credit

To support the cultural industries during the pandemic, the government is proposing to temporarily extend some deadlines and amend some requirements for the film and television, interactive digital media and book publishing tax credits. The following table[2] summarizes the proposed temporary changes.

 

Ontario Research and Development Tax Credit (ORDTC)

This budget proposes to extend the reporting period to claim an ORDTC as follows:

This change will would be similar to the extension for federal scientific research and experimental development claims.

Property taxes

Business Education Tax (BET)

Business Education Tax is a property tax earmarked for public education. Budget 2020 proposes to reduce the BET rate to 0.88 percent for both commercial and industrial properties whose BET rate is higher than 0.88 percent, beginning in 2021. The government estimated 94 percent of Ontario businesses will see a lower rate. As the BET represents a large portion of a business’s total property tax, this change may be significant for many, depending on their locations.

Municipal property tax reductions

The provincial government plans to enable municipalities to reduce property taxes for eligible small business properties. Budget 2020 would allow municipalities to create a new property subclass specifically for small business properties, allowing them to provide targeted relief to small businesses. Budget 2020 also mentions that the provincial government will consider matching these municipal property tax reductions.

Sales tax measures

Beer tax and wine tax rates

Budget 2020 proposes to freeze beer tax rates until March 1, 2022. 

Wine basic tax rates were scheduled to increase on June 1, 2020. During the state of emergency, the government had prevented the increase from being applied up to December 31, 2020. Budget 2020 proposes to retroactively cancel the increase.

Harmonized sales tax

Budget 2020 proposes no changes to the current 13 percent HST rate, which is composed of a federal component of five percent and a provincial component of eight percent.

Funding summary

Healthcare

The additional $7.5 billion in “Protect” funding is targeted towards healthcare, and will be allocated to:

  • increase the average daily care per long-term care residents to four hours per day over a four-year period,
  • invest $4 billion in 2021-22 and $2 billion in 2022-23 to battle the COVID-19 pandemic and
  • open a new hospital in Vaughan.

Families, workers, employers

The additional $2.4 billion in “Support” funding is targeted towards families, workers and employers, and will include among other initiatives:

  • The Support for Learners initiative and Seniors’ Home Safety Tax Credit (previously mentioned)
  • $60 million over three years for the Black Youth Action Plan to support Black youth to achieve social and economic success
  • An additional $1.8 billion in the Support for People and Jobs Fund over the next two years, which has thus far gone towards mental health and addiction programs, as well as loans for indigenous small and medium-sized businesses

Recovery efforts

The new $4.8 billion in “Recover” funding is targeted towards new supports to help with an economic recovery, including:

  • $180.5 million over three years for training, upgrading skills and apprenticeships
  • $680 million over four years for broadband infrastructure
  • $150 million set aside to provide Ontario residents with support of up to 20 percent of eligible Ontario tourism expenses
  • Several changes mentioned above, including changes to electricity rates, BET rates and the EHT exemption

 

[1] Ontario Ministry of Finance (2020). Ontario’s Action Plan: Protect, Support, Recover - 2020 Ontario Budget. Retrieved from the Government of Ontario website: https://budget.ontario.ca/2020/pdf/2020-ontario-budget-en.pdf

[2] Ontario Ministry of Finance (2020). Ontario’s Action Plan: Protect, Support, Recover - 2020 Ontario Budget. Retrieved from the Government of Ontario website: https://budget.ontario.ca/2020/pdf/2020-ontario-budget-en.pdf