Executive Summary:
On March 23, 2023, Ontario’s Minister of Finance Peter Bethlenfalvy delivered the 2023 Ontario Budget (the 2023 budget). The 2023 budget revealed the framework for Ontario’s “Plan to Build”: a targeted approach to help people and businesses by offering tax relief to manufacturers and small businesses.
Despite budget 2023 being the largest spending plan in the province’s history, Ontario is on track to balance the budget by 2024–25, three years earlier than forecasted, due to record-high revenues and a historically low unemployment rate. In 2022–23, the Ontario government is projecting a deficit of $2.2 billion.
Ontario Budget 2023 – Commentary
Income tax measures
No changes were proposed to the Ontario corporate or personal income tax rates.
The Ontario Made Manufacturing Investment Tax Credit
A new Ontario Made Manufacturing Tax Credit is proposed, providing up to $2 million of corporate income tax relief for Canadian-controlled private corporations (CCPCs) that make certain qualifying investments. CCPCs with a permanent establishment in Ontario can receive a 10% refundable tax credit for capital investments in buildings, machinery, and equipment for use in manufacturing or processing in Ontario. Generally, qualifying investments would include expenditures in certain capital property. Examples of expenditures can include costs to construct, acquire, or renovate manufacturing or processing buildings in Ontario, as well as machinery or equipment used in the manufacturing or processing of goods in Ontario.
CCPCs are limited to $20 million of qualifying investments that are eligible for the tax credit, which must be shared among groups of associated corporations. As such, any one group of associated corporations would be entitled to up to $2 million of this refundable income tax credit annually.
Key takeaway
CCPCs that make qualifying investments in certain capital property used in manufacturing or processing within a permanent establishment in Ontario may be entitled to a refundable tax credit of up to $2 million per year.
Ontario small business corporate income tax
The small business corporate income tax supports CCPCs by providing a preferential tax rate to lower their tax costs. Currently, the preferential tax rate phases out when a CCPC, or an associated group of CCPCs, has between $10 million and $15 million of taxable capital employed in Canada. At the end of 2022, the Ontario government proposed to extend the top end of the phase-out range to $50 million, matching the range found in federal legislation. In the 2023 budget, Ontario government introduces the legislative amendments to bring this change into force. This change will apply to all tax years starting on or after April 7, 2022.
Key takeaway
The top-end increase of the phase-out range will allow more corporations to take advantage of the preferential small business corporate income tax rate and lower their tax costs.
Changes for tax credits available on various creative works
The Ontario government is modernizing its film and television tax credit by allowing professional film and television productions to claim the credits for productions distributed as online exclusives. Draft regulatory amendments for this change are available for public comment until April 11, 2023. Moreover, the Ontario government is considering additional modernization measures, including:
- Implementing a requirement to provide on-screen acknowledgment of the film and television tax credit assistance received.
- Reviewing whether the film and television tax credit regional bonus for productions substantially produced outside of the Greater Toronto Area is meeting its aims.
- Exploring potential opportunities for administrative simplifications related to the computer animation and special effects tax credit.
Key takeaway
Media creators can expect increased access to tax credits that support their work.
Other tax measures
Wine tax changes
Effective July 1, 2023, a single basic tax rate of 12% will apply on wine and wine coolers sold in off‐site retail wine stores, including wine boutiques. This will replace the current four separate basic tax rates that apply to wine sold in off‐site retail wine stores with a single rate. The basic tax rates on the retail price of wine currently range from 6.1% to 22.6%.
These changes are in response to a World Trade Organization settlement reached between Canada and Australia on July 22, 2020. The settlement related to Australia’s complaint about Ontario’s measures governing the sale of wine that favour domestic wine as compared to imported wines.
Key takeaway
Although it is to the detriment of previously tax-favoured domestic wine, the application of a single tax rate rather than four should simplify tax administration.
Cutting the Gas and Fuel Tax
As previously announced, being part of Ontario’s plan to help keep costs down for Ontario families and businesses, the government has extended the current gas tax and fuel tax rate cuts for an additional year at 9 cents per liter until Dec. 31, 2023.
Key takeaway
These cuts are expected to save Ontario households $195 on average between July 1, 2022, and Dec.31, 2023.
Selected non-tax measure
Expansion of senior citizen annual income payments
To help combat the rising cost of goods and services, as previously announced, Ontario is temporarily doubling the Guaranteed Annual Income System (GAINS) payments beginning January 2023 until the end of December 2023. GAINS provides a monthly, non-taxable benefit to low-income Ontario seniors. Ontario is also proposing to make changes to expand the eligibility for GAINS, starting in July 2024, through a higher private income threshold and proposing to index this benefit annually so that it increases with inflation.
Key takeaway
The continuous support from the Ontario government for low-income seniors should assist in subsidizing the rising costs of goods and services.
