Canada

Standing up for Ontario small businesses - 2018 Ontario fiscal update

TAX ALERT  | 

The Ontario government provided a first look at how it plans to tackle Ontario’s finances in its fall fiscal update on Thursday, November 15, 2018. This release will highlight the significant tax changes included in Minister Fedeli’s statements to the legislature.

Corporate tax announcements

Passive income grind of the Small Business Deduction

Ontario supports small businesses by providing the Ontario Small Business Deduction (SBD), which reduces the Ontario general Corporate Income Tax (CIT) rate from 11.5 per cent to 3.5 per cent. The federal government introduced a measure to phase out access to the federal small business CIT rate based on the amount of passive investment income earned in an associated group for tax years beginning after 2018. The previous Ontario government announced in its 2018 Budget (2018 Budget) that it would parallel the federal change.

Ontario confirmed its commitment to helping small businesses and cutting taxes. It is proposing not to parallel the federal measure and will not proceed with the 2018 Budget proposal.

Employer Health Tax relief

Ontario employers will benefit from an increased exemption from the Employer Health Tax (EHT). For eligible private-sector employers, the first $450,000 of payroll is already exempt from EHT. Based on indexation, this amount is scheduled to increase to $490,000 in 2019.

Accelerated depreciation

Ontario’s Minister of Finance is keen to remain competitive with bordering U.S. states and is encouraging the federal counterparts to implement changes such as the immediate expensing of depreciable assets as is the case in the United States.

If the federal government introduces a measure that accelerates the expensing of new depreciable assets, Ontario will parallel this measure.

Research and development

Ontario will not proceed with the announced 2018 Budget change to increase the 8 per cent Ontario Innovation Tax Credit rate for qualifying corporations that make significant investments in research and development.

Personal tax announcements

Personal tax brackets

Ontario will not proceed with the 2018 Budget changes to eliminate surtaxes for personal income tax and the addition of two new tax brackets, a change that would have resulted in modest tax increases for some individuals.

Low-income Individuals and Families Tax (LIFT) Credit

Ontarian’s will benefit from the Low-income Individuals and Families Tax (LIFT) Credit effective January 1, 2019, where a person who works full time at minimum wage (earning nearly $30,000) would pay no Ontario Personal Income Tax.

With its fall fiscal update, the current Ontario government is standing behind its promise to open Ontario for business while making life more affordable for individuals and families. The announcements in this update will have a favourable impact on middle market businesses as they cope in a challenging economic environment.

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