2020-2021 Ontario Budget Tax Measures Summary
Introduction
The Ontario Finance Minister Rod Phillips tabled the province’s 2020-2021 budget on November 5th, 2020. Ontario is projecting a budget deficit of $38.5 billion in 2020-2021 and is also projecting deficits for the next two fiscal years.
The following is a summary of the provincial government’s proposed tax measures in its 2020 Budget. The proposed measures are built upon measures announced in the March 2020 Economic and Fiscal Update to help residents of Ontario deal with the COVID-19 pandemic.
Measures Affecting Individuals
Seniors’ Home Safety Tax Credit
The Seniors’ Home Safety Tax Credit is a refundable tax credit meant to assist seniors with living longer in their homes. The refundable credit is equal to 25% of eligible expenses up to a maximum of $10,000, as such the maximum credit is $2,500.
Eligible expenses need to be paid or payable in 2021 to the extent that they relate to renovations that improve safety and accessibility or help a senior be more functional or mobile at home. Examples of eligible expenses include:
- Renovations to permit a first-floor occupancy or secondary suite for a senior;
- Grab bars and related reinforcements around the toilet, tub and showers;
- Wheelchair ramps, stair/wheelchair lifts and elevators;
- Non-slip flooring;
- Additional light fixtures throughout the home and exterior entrances;
- Automatic garage door openers; and
- Modular or removeable versions of a permanent fixture.
Seniors will be able to claim the credit for eligible expenses made to the individual’s principal residence or a residence the individual expects to become their principal residence within 24 months of the end of 2021.
Employer Health Tax (EHT) Reduction
EHT is a payroll tax, which is calculated based on total remuneration paid in Ontario. Employers with annual Ontario remuneration of $5 million or less are eligible to claim the EHT exemption.
The Ontario Economic Action Plan released in March 2020 increased the EHT exemption amount from $490,000 to $1 million for 2020 only, to provide employers relief during the COVID-19 pandemic. The 2020-2021 Budget is proposing to make this increase permanent. The tax saving from the application of the new EHT exemption could amount to an extra $9,945 or to a total of $19,500 in EHT savings for most for eligible employers.
In addition, the Ontario Government is also proposing to increase the payroll threshold at which employers are required to pay installments starting in 2021 from $600,000 to $1,200,000. As a result, employers who claim the full EHT exemption will only be required to pay instalments when they owe more than $3,900.
The EHT exemption is indexed to inflation and changes every five years. The last change for inflation was in 2019. As a result of this large change to the exception in 2020, the next increase to the EHT exemption, which was scheduled for 2024 will be deferred until January 1, 2029.
Cultural Media Tax Credits Eligibility
Ontario offers several refundable tax credits to support cultural industries. In order to support companies and to minimize the loss of eligibility for these tax credits due to delays caused by the COVID-19 pandemic, the Ontario government is proposing to extend the deadlines and change some of the criteria for the cultural media tax credits. The proposed amendments are shown in the Table below.
|
Tax Credit |
Current Requirement |
Proposal |
Would Apply to: |
|
Ontario Film and Television Tax Credit (OFTTC) |
Companies must file an application for a certificate of completion within 24 months of the year end in which principal photography begins. |
Extend deadline by an additional 24 months. |
Productions for which eligible expenditures were incurred prior to March 15, 2020 and which were not completed, certified by Ontario Creates or deemed ineligible for the tax credit by Ontario Creates before March 15, 2020. |
|
Ontario Film and Television Tax Credit (OFTTC) |
Eligible expenditures can be claimed up to 24 months before principal photography begins. |
Extend this claim period by an additional 24 months. |
Productions for which eligible expenditures were incurred prior to March 15, 2020 and which were not completed, certified by Ontario Creates or deemed ineligible for the tax credit by Ontario Creates before March 15, 2020. |
|
Ontario Film and Television Tax Credit (OFTTC) |
Productions must have an agreement in writing to have the production shown in Ontario within two years of the production being complete and becoming commercially exploitable. |
Extend this two-year period by an additional 24 months. |
Productions for which eligible expenditures were incurred prior to March 15, 2020 and which were not completed, certified by Ontario Creates or deemed ineligible for the tax credit by Ontario Creates before March 15, 2020. |
|
Ontario Production Services Tax Credit (OPSTC) |
Total expenditures included in the cost of the production during 24 months after principal photography begins must exceed minimum spending requirements. |
Allow an additional 24 months to meet the minimum spending requirements. |
Productions for which eligible expenditures (or otherwise eligible expenditures) were incurred in Ontario in taxation years ending in 2020 and 2021. |
|
Ontario Production Services Tax Credit (OPSTC) |
Productions cannot claim the OPSTC until the taxation year in which principal photography begins. |
Allow certain companies to claim otherwise eligible expenditures incurred in the two taxation years prior to the year in which principal photography begins. |
Productions for which eligible expenditures (or otherwise eligible expenditures) were incurred in Ontario in taxation years ending in 2020 and 2021. |
|
Ontario Interactive Digital Media Tax Credit (OIDMTC) |
For specified and non-specified products, eligible labour expenditures must be incurred during the 37-month period prior to product completion. |
Extend this expenditure window by an additional 24 months. |
Products that were not completed before March 15, 2020 and for which eligible labour expenditures were incurred in the 2020 taxation year. |
|
Ontario Book Publishing Tax Credit (OBPTC) |
Literary works must be published in a bound edition of at least 500 copies. |
Temporarily waive this requirement. |
2020 and 2021 taxation years. |
Ontario Research and Development Tax Credit (ORDTC)
The ORDTC is a non-refundable tax credit available to corporations engaging in scientific research and experimental development in Ontario. Normally a corporation has 18 months after its taxation year end to claim the ORDTC.
The Government of Ontario is proposing to extend the period to claim the ORDTC, which mirrors the extension granted by the Federal Government for scientific research and experimental development claims.
Corporations with a taxation year end from September 13, 2018 to December 31, 2018 will have an extra six months to claim the ORDTC. Corporation with a taxation year end between January 1, 2019 and June 29, 2019 will be able to claim the ORDTC until December 31, 2020.
Property Tax Reduction for Employers
The Government of Ontario is proposing to reduce the high Business Education Tax rates to a rate of 0.88 per cent for commercial and industrial properties beginning in 2021. This change is expected to benefit 94 per cent of business properties in Ontario.
Property Tax Relief for Small Business
The Government of Ontario will allow beginning in 2021, municipal governments to provide property tax relief to small businesses. This will be done by allowing municipalities to adopt a new optional property subclass for small business properties. The method is meant to provide tax relief with the reduction of property tax on eligible small business properties. The provincial government will also consider matching the municipal tax reduction plans.
Other Technical Amendment
The Government of Ontario is also proposing the following amendments to the Taxation Act, 2007 to ensure:
- Individuals continue to have the right to appeal the amount of Ontario Trillium Benefit, Ontario Sales Tax Credit, Ontario Energy and Property Tax Credit, or Northern Ontario Energy Credit that they are entitled to receive;
- The Adoption Expenses tax credit can continue to be used in calculating the amount of tax payable by the spouse or common-law partner, when determining the amount of tax credits that can be transferred to a taxpayer from their spouse or common-law partner;
- The Low-income Individuals and Families Tax Credit continues not to affect the calculation of the Ontario surtax; and
- The Community Food Program Donation Tax Credit for Farmers continues to be the last tax credit to apply in calculating an individual’s Ontario income tax.
For more information, please refer to the Minister of Finance website
Prepared by:
Sam Levine, CPA,CA is a Tax Manager at Crowe BGK
Connect with him: [email protected]