Annex: Details of Tax Measures
This Annex provides detailed information on the tax measures described in the 2018 Ontario Economic Outlook and Fiscal Review. It includes details of the government’s proposed tax measures and technical amendments, 2018 Budget announcements that are not being implemented and federal measures that impact Ontario.
The Low-Income Individuals and Families Tax (LIFT) Credit
Starting with the 2019 tax year, the government is proposing to introduce a new non-refundable Low-income Individuals and Families Tax (LIFT) Credit. The LIFT Credit would eliminate or reduce Ontario Personal Income Tax (PIT) for low-income Ontario taxpayers who have employment income.
The proposed tax credit would be calculated as the lesser of:
- $850; and
- 5.05 per cent of employment income.
This amount would then be reduced by 10 per cent of the greater of:
- Adjusted individual net income in excess of $30,000; and
- Adjusted family net income in excess of $60,000.
The resulting amount would then be limited to the taxpayer’s PIT otherwise payable, excluding the Ontario Health Premium.
If the taxpayer has a spouse or common-law partner at the end of the year, the taxpayer’s adjusted family net income would include the income of that spouse or common-law partner.
People who are resident in Canada at the beginning of the year and resident in Ontario at the end of the year would be eligible for this credit.
Taxpayers who would not get this new tax relief would include those who have:
- No Ontario PIT payable;
- No employment income;
- More than $38,500 in adjusted individual net income;
- A higher-income partner such that their adjusted family net income is greater than $68,500; or
- Been in prison for more than six months during the year.
This credit would reduce Ontario revenue by $125 million in 2018–19.
Employer Health Tax
The Employer Health Tax (EHT) is paid by employers on their Ontario payrolls. Private-sector employers may be eligible for an exemption from EHT on up to $450,000 of payroll. Public-sector employers, and private-sector employers with payrolls over $5 million are not eligible for the exemption.
Based on Ontario’s Consumer Price Index, the EHT exemption will increase from $450,000 to $490,000, as of January 1, 2019. This will provide about $40 million in additional tax relief to Ontario employers, with the EHT reduced by an average of $690 for about 58,000 employers.
Electricity Distribution Sector — Extension of Time Limited Tax Relief
In the 2015 Budget, Ontario announced time-limited relief under the Electricity Act, 1998 from taxes on the sale of electricity assets by municipalities to the private sector. The relief is scheduled to expire on December 31, 2018. Through regulatory amendments, Ontario is extending the tax relief to December 31, 2022. The relief applies to Transfer Tax and certain payments in lieu of taxes (PILs) payable on the transfer of electricity assets to the private sector.
For transfers of electricity assets occurring between January 1, 2019 and December 31, 2022, the Transfer Tax rate will be reduced from 33 per cent to 22 per cent, and the rate will be zero for transfers by municipal electricity utilities with fewer than 30,000 customers. Additionally, any capital gains arising under the PILs deemed disposition rules will be exempt from PILs.
Property Tax Exemption for the Royal Canadian Legion
The government proposes an amendment to the Assessment Act which would, if passed, create a provincewide property tax exemption to properties occupied by branches of the Royal Canadian Legion. See Chapter I, Section C: Respecting Consumers and Families for more details.
2018 Budget Announcements Not Being Implemented
The 2018 Ontario Budget proposed adjustments to the rates, brackets, surtax and credits for Ontario’s Personal Income Tax (PIT). The government will not proceed with those changes, preventing a PIT increase of about $200, on average, for approximately 1.8 million people.
Small Business Limit
The 2018 Ontario Budget proposed to parallel a federal measure to phase out the $500,000 business limit for corporations that earn between $50,000 and $150,000 of passive investment income in a taxation year. The federal changes apply for tax years that begin after 2018.
The government will propose legislation to ensure that Ontario will not parallel this new federal restriction. All eligible Ontario small businesses will continue to receive the Ontario small business deduction.
Research and Development Tax Credits
The 2018 Ontario Budget announced 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. Ontario will review tax support provided for research and development activity and, as such, the government will not be implementing these changes. The government will ensure that support provided for research and development is effective and efficient.
Employer Health Tax
The 2018 Ontario Budget proposed exploring measures to target the Employer Health Tax exemption. The government is not moving forward with these proposals.
Ontario also proposes to make the following technical amendments to:
- Adjust the non-eligible dividend tax credit calculation to maintain the rate at 3.2863 per cent (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); and
- Amend certain regulations to replace outdated references to Goods and Services Tax and Retail Sales Tax with the term Harmonized Sales Tax.