2019 Ontario budget: Tax highlights

April 11, 2019

Issue 2019-14

In brief

On April 11, 2019, Ontario’s Minister of Finance, Victor Fedeli, presented the province’s budget. The budget does not change corporate or personal income tax rates, but does:

  • introduce the Ontario Job Creation Investment Incentive, an increased first year capital cost allowance (CCA) deduction on eligible depreciable property acquired after November 20, 2018  
  • ease the administrative process for small video game developers that claim the Ontario Interactive Digital Media Tax Credit
  • reduce the Estate Administration Tax for all estates
  • introduce the Ontario Childcare Access and Relief from Expenses (CARE) tax credit

This Tax Insights discusses these and other tax initiatives proposed in the budget. 

In detail

Business tax measures

Corporate income tax rates

Ontario’s corporate income tax rates will remain as shown in the table below. The table also shows combined federal/Ontario corporate tax rates.

Federal and Ontario corporate rates

Ontario

Federal + Ontario

 

2018 - 2020

2018

2019 - 2020

General income

11.5%

26.5%

M&P income

10%

25%

Canadian-controlled private corporations (CCPCs)

active business income to $500,000

3.5%

13.5%

12.5% (1)

investment income

11.5%

50.17%

1. The combined rate reflects the decline in the federal small business tax rate from 10% to 9% on January 1, 2019.

Ontario Job Creation Investment Incentive

The budget introduces the Ontario Job Creation Investment Incentive. This incentive parallels the federal CCA measures introduced in the 2018 Federal Fall Economic Statement (for more information, see our Tax Insights2018 Federal Fall Economic Statement: Tax highlights”).

The incentive provides an increased first year CCA deduction on eligible depreciable property acquired after November 20, 2018, and available for use before 2028, as follows:

  • a 100% CCA deduction – eligible manufacturing and processing (M&P) and specified clean energy equipment are eligible for a 100% CCA deduction in the first year that it becomes available for use
  • the Accelerated Investment Incentive (AII) –  other eligible depreciable capital property is generally eligible for a maximum first-year CCA deduction on the net additions to a CCA class that is 1.5 times the standard CCA deduction for that class, subject to a maximum of 100% (effectively suspending the half-year rule and providing a CCA deduction that is up to three times the usual first-year maximum)

The 100% CCA deduction and the AII will be phased out for property that becomes available for use after 2023 and before 2028.

Cultural media tax credits

Certification process

Ontario offers five refundable cultural media tax credits, all of which are subject to a backlog of tax credit applications. The province plans to review the cultural media tax credit certification process to streamline administration and reduce the tax credit application backlog.

Ontario Interactive Digital Media Tax Credit

The Ontario Interactive Digital Media Tax Credit is a refundable tax credit available to qualifying corporations for expenditures related to eligible interactive digital media products. The credit has four streams, one of which is the specialized digital game corporation stream.

Specialized digital game corporations (i.e. companies that spend at least $1 million in a taxation year on Ontario labour expenditures for eligible digital games) can apply for tax credit certification annually, instead of applying separately for each product that they complete.

The budget proposes to reduce the minimum Ontario labour expenditure from $1 million to $500,000, effective for taxation years commencing after April 11, 2019. This will allow smaller video game developers to qualify as a specialized digital game corporation and thus be able to apply for the tax credit annually.

Ministers’ Film and Television Advisory Panel

Ontario intends to establish an advisory panel on the film and television industry that will gather evidence and advice on industry trends, challenges and opportunities. The goal is to help the province grow the industry in Ontario and maximize benefits for the province.

Passive investment income and the small business deduction (SBD) limit

The budget provides a reminder that Ontario will not parallel the 2018 federal budget measure that phases out the $500,000 SBD limit for Canadian-controlled private corporations (CCPCs) that earn between $50,000 and $150,000 of passive investment income in a taxation year, for taxation years beginning after 2018. By not paralleling the federal measure, a CCPC could continue to save up to $40,000 in Ontario tax annually. 

Personal tax measures

Personal income tax rates

The budget does not change Ontario personal income tax rates. The top two combined federal/Ontario personal income tax rates are shown below.

Combined federal/Ontario rates

Taxable income

Ordinary income

Capital gains

Canadian dividends

Eligible

Non-eligible (1)

2019


Top bracket

> $220,000


53.53%


26.76%


39.34%

47.40%

2018

46.65%

2019


2nd from top bracket

$210,371 to $220,000


51.97%


25.98%


37.19%

45.60%

2018

$205,842 to $220,000

44.84%

1. The combined non-eligible dividend tax rates reflect the decline in the federal non-eligible dividend tax credit rate (which results from a decrease to the federal small business tax rate, as noted above).

Estate Administration Tax

The budget proposes to eliminate the Estate Administration Tax on the first $50,000 of the value of all taxable estates, effective for estate certificates requested after December 31, 2019. Estates will save up to $250 of Estate Administration Tax.

Ontario will also:

  • introduce clarifying legislative amendments to the Estate Administration Tax Act, 1998, relating to refunds of overpayments of the Estate Administration Tax
  • effective January 1, 2020, extend the deadline to file the Estate Administration Tax Information Return to 180 days (up from 90 days) after the estate certificate is issued, and the deadline to file an amended information return to 60 days (up from 30 days)
Ontario Childcare Access and Relief from Expenses (CARE) tax credit

The budget proposes a new refundable Ontario CARE personal income tax credit, starting the 2019 taxation year. The CARE tax credit will be based on a taxpayer’s family income and eligible childcare expenses (i.e. the same family income and eligible childcare expenses used to determine the taxpayer’s child care expense deduction).

The CARE tax credit will be calculated by multiplying the taxpayer’s eligible childcare expenses by the rate determined in the table below:

Family income

Rate calculation

 

Up to $20,000

75%

 

$20,000 to $40,000

75% minus 2 percentage points for each $2,500 (or part thereof) above $20,000

 

$40,000 to $60,000

59% minus 2 percentage points for each $5,000 (or part thereof) above $40,000

 

$60,000 to $150,000

51% minus 2 percentage points for each $3,600 (or part thereof) above $60,000

 

> $150,000

0%

 

The CARE tax credit will be claimed on an individual’s personal tax return for the 2019 and 2020 taxation years. Starting with the 2021 taxation year, families can choose to apply for regular advance payments throughout the year or receive a single payment when they file their tax returns.

Low-Income Individuals and Families Tax (LIFT) Credit

The budget provides a reminder that, effective January 1, 2019, low-income Ontario taxpayers with employment income are eligible for the LIFT credit, a non-refundable tax credit that can provide up to $850 in tax savings. For more information, see our Tax Insights2018 Ontario fall economic statement: Tax highlights.”

Other tax measures

Tax evasion and avoidance

The government will fight tax evasion and avoidance, and create a fair and transparent tax system that discourages artificial transactions to avoid taxes. Ontario has created a specialized unit of tax experts who are working with federal and provincial tax officials to find and address tax loopholes and abuse.

Technical amendments

Ontario will also amend its provincial statutes, administered by the Ontario Ministry of Finance, to:

  • improve effectiveness and enforcement
  • maintain the integrity and equity of its tax and revenue collection system
  • enhance legislative clarity and flexibility to preserve policy intent

Contact us

Saul Plener

National Private Company Services Leader, PwC Canada

Tel: +1 905 418 3471

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