On November 14, 2022, Finance Minister Peter Bethlenfalvy delivered the 2022 Ontario Economic Outlook and Fiscal Review (the “Fiscal Review”). More commonly known as the Fall Economic Statement, the Fiscal Review serves as a precursor to the provincial government’s 2023 budget. Short-term uncertainty was a key theme in the Fiscal Review, as the province continues to navigate global headwinds like inflation and high interest rates.
The Fiscal Review includes a progress update on the government’s plan to build Ontario and introduces several measures to help businesses and families keep costs down. Ontario’s deficit for fiscal year 2022-23 has been revised downward since the release of the province’s April budget from $19.9 billion to $12.9 billion. Furthermore, the Fiscal Review is projecting a slower growth in real GDP from the previous year, 2.6% for 2022 and 0.5% for 2023.
Estimated deficits
|
|
2022-23 |
2023-24 |
2024-25 |
|
Original estimate (Budget 2022) |
($19.9B) |
($12.3B) |
($7.6B) |
|
Revised estimate (Fiscal Review 2022) |
($12.9B) |
($8.1B) |
($0.7B) |
Ontario is providing immediate expensing to allow Canadian Controlled Private Corporations (CCPCs) to write-off up to $1.5 million of certain eligible capital property purchased on or after April 19, 2021 that becomes available for use before January 1, 2024. This tax incentive is also available to Canadian resident sole proprietors (other than trusts) and certain partnerships where all the partners are CCPCs or Canadian resident individuals (other than trusts), but only for eligible property acquired on or after January 1, 2022, and that will become available for use before January 1, 2025.
The $1.5 million annual limit must be shared by members of an associated group. Eligible properties are capital property subject to the capital cost allowance rules other than property included in Classes 1 to 6, 14.1, 17, 47, 49 and 51, which are generally long-life assets such as buildings, and unlimited life intangibles such as goodwill. Eligible properties include office furniture in Class 8, passenger vehicles and tractors in Classes 10 and 10.1, freight trucks and rental cars in Class 16, data network infrastructure equipment and systems software in Class 46, as well as computers in Class 50.
This measure parallels the federal immediate expensing rule enacted on June 23, 2022.
Currently, Ontario provides a small business corporate income tax rate of 3.2% for CCPCs on their first $500,000 of active business income. This small business rate is reduced gradually for CCPCs and associated CCPCs when the taxable capital employed in Canada reaches $10 million in the previous year, and eliminated at $15 million.
Ontario’s announcement mirrors the federal government’s proposals to increase the upper limit of taxable capital at which the SBD is fully ground down to $50 million, up from $15 million. The $10 million threshold remains intact. This measure would apply to taxation years beginning on or after April 7, 2022.
As of the date of this tax alert, a bill containing the proposed federal rules has not received Royal Assent. Please see our recent tax alert on the proposed federal SBD changes to learn more.
At the date of issue, in addition to Ontario, BC is the only other province to confirm their intention to follow the federal proposal.
The Ontario Disability Support Program (ODSP) provides income support to people with disabilities. ODSP recipients are subject to a clawback based on their income levels. Currently, ODSP recipients can earn up to $200 net income per month without a reduction in benefits. Each additional dollar earned reduces the ODSP payment by 50 cents.
The Fiscal Review proposes to increase the monthly ODSP earnings exemption from $200 to $1,000 per month. The ODSP recipient would keep 25 cents of income support for each dollar earned above the $1,000 monthly exemption. The proposed measures include plans to annually adjust allowances for inflation under the ODSP and the maximum monthly amount for the Assistance for Children with Severe Disabilities program, beginning in July 2023.
The Fiscal Review proposes to double the Guaranteed Annual Income System (GAINS) payment for low-income seniors for 12 months starting in January 2023. This would increase the maximum monthly payment to $166 from $83 for single seniors, and $332 from $166 for couples.
The Fiscal Review includes the government’s recent announcement to increase the general minimum wage to $15.50/hour as of October 1, 2022. The other special minimum wage categories have also been proportionally increased. The next minimum wage increase will be announced in April 2023.
The government previously introduced cuts to the gas tax (5.7 cents/litre) and fuel (diesel) tax (5.3 cents/litre) for six months beginning July 1, 2022. The cuts brought both taxes to the current level of 9 cents/litre. These cuts have been extended for another 12 months, to December 31, 2023. The government estimates that the average Ontario household will save $195 over the entire 18-month term of the tax reductions.
The government expressed concerns regarding the impact of the trade in unregulated tobacco and is taking several steps to combat the situation, including:
As part of an overall strategy, the government is conducting a review of the existing Tobacco Tax Act, which could signal further changes ahead in the form of legislative amendments.
The following notable announcements were made by the government in the Fiscal Review:
Initiatives to support the development of critical minerals, including in the significant ‘Ring of Fire’ region of Northern Ontario, include:
Investments to support manufacturing sectors, include:
Investments to support innovation and new technologies, include:
Measures to support to domestic supply chains, include:
Workforce and training measures, include:
A full listing of Ontario’s Capital Plan is summarized in our ON Budget 2022.
The following measures announced in ON Budget 2022 have now received Royal Assent:
The following updates were provided to measures previously introduced in ON Budget 2022:
Additional details on these previously announced measures can be found in our ON Budget 2022 tax alert.
Have questions? Let’s talk. Contact your local advisor or reach out to us here.
On November 14, 2022, Finance Minister Peter Bethlenfalvy delivered the 2022 Ontario Economic Outlook and Fiscal Review (the “Fiscal Review”).
Disclaimer
The information contained herein is general in nature and is based on proposals that are subject to change. It is not, and should not be construed as, accounting, legal, or tax advice or an opinion provided by Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, specific circumstances or needs and may require consideration of other factors not described herein.
Subscribe to receive relevant and timely information and event invitations.
This website uses cookies to provide necessary site functionality, monitor performance, give you access to products and services that are most relevant to you, and improve the online user experience. For further information about how we use cookies, please visit our Privacy Statement. For information on how to adjust your cookie preferences including how to delete cookies, please consult your browser’s “Help” function.
