Peter Wiesner CPA, CA
Ontario Budget April 11, 2019
Here are some of the highlights
A new refundable Childcare Access and Relief from Expenses (CARE) tax credit in respect of childcare costs for Ontario families; A reduction and simplification of the Estate Administration Tax; Proposals to streamline cultural media tax credit administration, including a review of tax creditcertification and changes to cut red tape for video game developers; The Low‐income Individuals and Families Tax (LIFT) Credit that was introduced in the 2018Ontario Economic Outlook and Fiscal Review to provide tax relief for low‐income Ontariotaxpayers who have employment income, including those earning minimum wage; The Ontario Job Creation Investment Incentive to encourage businesses to invest in Ontario nowand create jobs for the people of Ontario; and Supporting small businesses by not paralleling the federal government in phasing out the benefitfrom the lower small business corporate income tax rate.
SUMMARY OF MEASURES ($ Millions) 2018–19 2019–20 2020–21 2021–22New MeasuresChildcare Access and Relief from Expenses (CARE) Tax Credit1 (100) (390) (390) (390)Estate Administration Tax 0 (2) (10) (10)Measures Outlined 2018 Ontario Economic Outlook and Fiscal ReviewLow-income Individuals and Families Tax (LIFT) Credit (125) (495) (495) (495)Ontario Job Creation Investment Incentive2 (615) (1,125) (785) (595)Not Paralleling Federal Phase-out of Small Business Deduction (45) (145) (160) (175)Property Tax Exemption Ontario Branches of the Royal Canadian Legion (s) (s) (s) (s) Total (885) (2,155) (1,840) (1,665)
As for Ontario businesses, the budget scraps an anticipated one-per-cent cut in the corporate tax rate in favour of a tax credit intended to encourage businesses to make capital investments.
The Provincial Economy
The provincial economy stats are as follows: A total of 132,000 net new jobs have been created in the province between June 2018 andFebruary 2019; The unemployment rate has declined by 0.2 percentage points, from 5.9 per cent in June 2018 to5.7 per cent in February 2019; and In February 2019, the Ontario Chamber of Commerce (OCC) reported that the proportion ofbusinesses experiencing confidence in the broader economy is up by seven percentage pointscompared to last year, and the share of businesses lacking confidence in the economy declinedby 21 percentage points.
The $163.4 billion budget – nearly $5 billion larger than the last Liberal budget – pegs current deficit at $11.7 billion,
and the government says the books won’t be balanced by 2023–24.
PROVIDING TAX RELIEF FOR FAMILIES WHEN THEY NEED IT THEMOST -a $250 savings
Estate Administration Tax is charged on the value of an estate, when an estate certificate is issued.The estate certificate gives proof of the estate representative’s legal authority to deal with theassets of the estate. An estate certificate is not always required to administer an estate. However,in situations where it is necessary to obtain a certificate, an application for the certificate must bemade to the Ontario Superior Court of Justice. As part of the application process, an estaterepresentative, such as a family member, must pay the Estate Administration Tax based on thevalue of the estate. Only estates that go through the estate certificate process are subject to EstateAdministration Tax.Currently, there is no Estate Administration Tax payable if the value of the estate is $1,000 or less.For all other estates, the tax is applied at the following two rates: $5 for every $1,000, or part thereof, of the first $50,000 of the value of the estate; and $15 for every $1,000, or part thereof, of the value of the estate exceeding $50,000.To make life easier for families during this difficult time, Ontario is proposing to eliminate the EstateAdministration Tax on the first $50,000 of the value of the estate. The Estate Administration Taxwould continue to apply to the value of the estate exceeding $50,000 at the current rate. The taxwould simply be calculated as: $15 for every $1,000, or part thereof, of the value of the estate exceeding $50,000.The proposed calculation of Estate Administration Tax would apply if an estate certificate isrequested on January 1, 2020, or later.
For an estate valued at $50,000, would no longer need to pay Estate Administration Tax on behalf of these estates.
THE LOW-INCOME INDIVIDUALS AND FAMILIES TAX (LIFT) CREDIT
Effective January 1, 2019, the non‐refundable Low‐income Individuals and Families Tax (LIFT) Creditprovides up to $850 in Ontario Personal Income Tax relief to low‐income Ontario taxpayers whohave employment income, including those earning minimum wage. This credit was announced inthe 2018 Ontario Economic Outlook and Fiscal Review.Ontario tax filers will be able to claim the LIFT Credit for 2019 when they file their 2019 tax returnin 2020.
There is a two‐step process to calculate the LIFT Credit.Step 1: Determine the maximum LIFT Credit, which is the lesser of: $850; and 5.05 per cent of employment income.Step 2: Reduce the amount determined in Step 1 by 10 per cent of the greater of the tax filer’s: Adjusted individual net income greater than $30,000; and Adjusted family net income greater than $60,000.The amount determined in Step 2 will then be limited to the taxpayer’s Ontario Personal IncomeTax otherwise payable, excluding the Ontario Health Premium.With this credit, a single person who works full‐time at minimum wage (earning nearly $30,000)with no other income will receive $850 in Ontario tax relief and pay no Ontario Personal IncomeTax. Those who earn more than $30,000 will receive less tax relief.
A tax filer who is a Canadian resident, lived in any province or territory at the beginning of 2019 andwho lives in Ontario at the end of the year will be eligible for this credit.Tax filers who will not receive this tax relief will include those who have: No Ontario Personal Income Tax payable; No employment income; More than $38,500 in adjusted individual net income; More than $68,500 in adjusted family net income; or Spent more than six months in prison during the year
MANUFACTURING MACHINERY INVESTMENT EXAMPLE
Chart A.4 shows the difference between annual income tax deductions under the formerdepreciation schedule and the immediate writeoff measure on a $1 million investment inmanufacturing machinery. Under the former depreciation schedule, a business could annually deduct 50 per cent of thecost of manufacturing machinery for federal and Ontario income tax purposes (on a decliningbalance basis). In the first year the asset was put into use, the deduction was limited to halfof the normal amount (i.e., 25 per cent). With the immediate writeoff measure, a business can deduct the full cost of themanufacturing machinery from its taxable income in the first year the machinery is putinto use.
ONTARIO CHILDCARE ACCESS AND RELIEF FROM EXPENSES (CARE) TAX CREDIT
The government proposes a new refundable Ontario Childcare Access and Relief from Expenses(CARE) Personal Income Tax credit, starting with the 2019 tax year.
The new CARE tax credit would be based on a tax filer’s: Family income, which is based on the income of the family members used in determining the taxfiler’s Child Care Expense Deduction; and Eligible child care expenses, defined as the tax filer’s total entitlement under the Child CareExpense Deduction.
For familes making greater than $150,000 no credit is available
OLG and Gambling
To continue to promote consumer choice, the Ontario Lottery and Gaming Corporation (OLG) isundertaking a number of initiatives that will create jobs, provide opportunities for businessesand improve access to the products the people of Ontario already enjoy. These initiativesinclude: Partnering with the private sector to leverage billions of dollars of new investments toexpand and upgrade existing casinos in communities such as Chatham, Innisfil and Rexdale,while building new facilities in Pickering and Peterborough; Enhancing the retail experience for lottery customers by making it easier to purchase lotterytickets at grocery store check‐out lanes at select retailers; Upgrading OLG lottery terminals and expanding its lottery retail network to provide moreinteractive gaming experiences; Increasing convenience by offering consumers the ability to purchase products such asPro‐Line and Lotto 6/49 using their smartphones; and Partnering with professional sports leagues and teams such as the Toronto Raptors toprovide customers with world‐class gaming experiences and entertainment.In addition, the government will begin allowing casinos to advertise complimentary alcohol. Thischange will level the playing field for Ontario casinos and enable them to compete moreeffectively with those in the United States.
Government is planning major changes to the way booze is sold in the province that will include permitting tailgating at sporting events,
allowing bars and restaurants to sell alcohol starting at 9 a.m. and allow licensed establishments to advertise “happy hour.”
Dental Program for Low Income Seniors
The previously announced dental program for low-income seniors, who do not have access to benefits, was also highlighted in the budget.
Under the program individuals over the age of 65 with an annual income of $19,300 or less, or senior couples with a combined income of less than $32,300,
will be able to receive dental services in public health units across the province.
Debt Interest Costs
Ontario is forecast to pay $13.3 billion in interest costs in 2019–20.
Interest on debt (IOD) is the Province’s fourth largest line item after health care, education and social services,is larger than the annual budget of most provincial ministries, and similar in size to the City of Toronto’s annual budget. The people of Ontario will pay $910 per person, or $3,638 per family of four, in interest in 2019–20. Spending on interest to service the debt is money that does not provide essential programs that help the people of Ontario in their daily lives nor reduce their taxes.
The Government has; Froze driver and vehicle licence fees Increased access to snowmobiling licences and safety information online Introduced free GO Transit rides for kids 12 and under Froze all hunting and fishing fee increases and removed the $2 service fee Began delivering better regional transit across Ontario including: Increased GO Train service in the Greater Toronto and Hamilton Area Partnerships with the private sector to build new GO stations at Woodbine and Mimico Historic two‐way weekday GO Train service between Toronto and Niagara Falls A Terms of Reference with the City of Toronto on uploading the subway and building transit faster Announced $1.2 billion in funding for the Ottawa LRT Issued the “Buck‐A‐Beer” Challenge Halted the beer tax hike Terminated wasteful energy contracts, including the White Pines Wind Project Lowered energy costs, including supporting $200 million in savings at Bruce Power being provided back to electricity consumers Scrapped the Green Energy Act to protect consumers and restore municipal authority over energy projects Passed legislation to end the cap‐and‐trade carbon tax Introduced the Fixing the Hydro Mess Act, 2019 to reform the electricity system to reduce costs, drive efficiencies and lower rates Scrapped the Drive Clean program effective April 1, 2019 Released a made‐in‐Ontario plan to protect and preserve the environment Invested $200 million in 405 small and rural municipalities to improve service delivery Introduced legislation to provide consistent, fair and transparent access to service animals in schools Eliminated property taxes for Ontario branches of the Royal Canadian Legion halls Helped to ensure the long‐term sustainability of the Ontario Hockey League (OHL) by cutting red tape Opened a new rest area in Gananoque to improve road safety along Highway 401
Prevented large‐scale power outages across Ontario by passing the Labour Relations Amendment Act (Protecting Ontario’s Power Supply), 2018
Supported connecting the Pikangikum First Nation community to Ontario’s electricity grid Responded to the forest fire crisis in Northern Ontario Freed police officers from SIU oversight when administering life‐saving naloxone Reformed police record checks to cut red tape and protect privacy Invested $25 million to fight guns and gangs Announced nine new Ontario Provincial Police (OPP) detachments Increased fairness for Ontario’s firefighters to better protect communities Improved the province’s correctional system, including through the hiring of more correctional officer graduates, and enhanced security at Elgin‐Middlesex Detention Centre in London
Introduced the Comprehensive Ontario Police Services Act, 2019 to restore respect for police officers Announced support for first responders across Ontario by planning to replace the Public Safety Radio Network Acted to protect kids, safeguard communities and combat the illegal market following federal legalization of cannabis: Enacted cannabis retail legislation and strict regulations for private stores Enacted a phased approach to retail licensing due to national supply shortages Provided municipalities with $30 million to assist with the implementation costs of legalization
Tax season is here and in full gear at this time.
Personal tax returns are due April 30th, 2019 for employees and sole proprietors are due June 15, 2019.
See you soon.