On November 5, 2020, the Honourable Rod Phillips, Minister of Finance, presented the 2020 Ontario budget, titled “Ontario Action Plan: Protect, Support, Recover.” The budget is part of the province’s three-year plan to strengthen the health care system, protect residents, support job creation, and accelerate the province’s economic recovery amid an unprecedented pandemic.
To help achieve these goals, the province proposed several tax initiatives, as discussed below.
Employer Health Tax
In March 2020, the Employer Health Tax (EHT) exemption was increased from $490,000 to $1 million for eligible employers with $5 million or less in annual remuneration. To support private sector employers, it is proposed that the increased exemption be made permanent. This proposal is anticipated to provide $360 million in tax relief to 57,000 employers in 2021, with 30,000 employers no longer being required to pay EHT.
Currently, most large companies in Ontario remit their EHT monthly. However, those companies with annual remuneration between $490,000 and $600,000, make remittances only on an annual basis. The budget proposes to increase the payroll threshold for monthly EHT remittances to $1.2 million.
Research and Development Tax Credit
The province intends to extend the period to claim an Ontario Research and Development Tax Credit (ORDTC) to match the federal extension provided for Scientific Research and Experimental Development (SR&ED) claims. Under this extension, corporations with tax year-ends from September 13, 2018 to December 31, 2018 will be allowed to defer their ORDTC claims for six months beyond the normal deadline, while those with tax year-ends from January 1, 2019 to June 29, 2019 must file their claim by December 31, 2020.
Commercial Property Tax
The business community in Ontario has been asking the government to address the wide range of Business Education Tax (BET) rates found throughout the province as this has created tax inequities over time. For 2021, the province is proposing to cut BET by approximately $450 million by reducing high BET rates to 0.88% for both commercial and industrial properties. These changes will impact 94% of business properties in Ontario. Currently, these taxes contribute significantly to the Ontario education system and the government is proposing to adjust the allocation of funds so that this reduction does not impact the funding of school boards.
In response to concerns voiced by small businesses about their property tax burden, the province is proposing to provide municipalities with the flexibility to focus property tax relief on this sector. Under this proposal, starting in 2021, municipalities will be able to adopt a new optional property subclass that may be applied to properties owned by small businesses to reduce their property taxes. To provide additional support to small businesses, the province is considering matching these municipal property tax reductions.
Beer Tax and Wine Tax
The 2020 Ontario budget will freeze beer tax rates until March 1, 2022, and retroactively cancel the increase in wine basic tax rates planned for June 1, 2020. In the meantime, the province has issued an order to prevent the application of the wine basic tax increase between June 1, 2020 and December 31, 2020.
Further information on Ontario’s 2020 budget may be found on the province’s website at: https://budget.ontario.ca/2020
If you have any questions about how these proposed changes might impact your organization, please do not hesitate to call the Ryan TaxDirect® line at 1.800.667.1600.