2020 Ontario budget: Tax highlights

November 05, 2020

Issue 2020-36

In brief

On November 5, 2020, Ontario’s Minister of Finance, Rod Phillips, presented the province’s budget. The budget:

maintains the employer health tax exemption at $1 million after 2020
introduces a temporary seniors’ home safety tax credit
extends various deadlines for certain cultural media tax credits
defers certain Ontario Research and Development Tax Credit claim filing deadlines

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
		2019	2020	2021	2019	2020	2021
General income		11.5%			26.5%
M&P income		10%			25%
Canadian-controlled private corporations (CCPCs)	active business income to $500,000	3.5%	3.2%¹		12.5%	12.2%¹
Canadian-controlled private corporations (CCPCs)	investment income	11.5%			50.17%
The rate reflects the decrease in Ontario’s small business tax rate from 3.5% to 3.2% on January 1, 2020.

Employer health tax (EHT)

The EHT exemption (the payroll threshold above which employers are subject to EHT, on an associated basis) had been temporarily increased to $1 million (from $490,000) for 2020. The budget proposes to:

make the $1 million EHT exemption permanent
move the next scheduled inflationary adjustment of the EHT exemption to January 1, 2029 (from 2024)
increase the payroll threshold for payment of monthly EHT instalments to $1,200,000 (from $600,000), starting 2021

Ontario Research and Development Tax Credit (ORDTC)

Corporations generally have 18 months after their taxation year end to file an ORDTC claim. The budget extends ORDTC claim filing deadlines that would ordinarily fall in the period from March 13, 2020 to December 30, 2020, to the earlier of:

six months after the standard deadline, and
December 31, 2020

This parallels the federal scientific research and experimental development claim filing deadline extensions.

Cultural media tax credits

As a result of the COVID-19 pandemic, companies operating in the cultural industries may find it difficult to meet certain tax credit deadlines and therefore lose eligibility for tax credit support. The budget proposes to temporarily extend some timelines and amend some requirements for four cultural media tax credits, as summarized in the table below.

Summary of proposed cultural media tax credit amendments
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.
	Eligible expenditures can be claimed up to 24 months before principal photography begins.	Extend this claim period by an additional 24 months.
	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.
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.
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.
Source: Ontario’s Action Plan (2020 Ontario Budget), page 224, Table A.1.

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
Combined federal/Ontario rates		Taxable income	Ordinary income	Capital gains	Eligible	Non-eligible¹
2021	Top bracket	> $220,000	53.53%	26.76%	39.34%	47.74%
2020						47.74%
2019						47.40%
2021	2^nd from top bracket	$214,368² to $220,000	51.97%	25.98%	37.19%	45.95%
2020		$214,368² to $220,000				45.95%
2019		$210,371 to $220,000				45.60%
The non-eligible dividend tax rates reflect the decline in Ontario’s non-eligible dividend tax credit rate for 2020, which resulted from the decrease to Ontario’s small business tax rate, as noted above. The $214,368 threshold will be indexed for 2021.

Seniors’ Home Safety Tax Credit (SHSTC)

The budget introduces a temporary refundable personal tax credit for improvements made to a senior’s principal residence in Ontario to facilitate safety and accessibility. The SHSTC will provide a tax credit of 25% on up to $10,000 of eligible expenses (maximum credit of $2,500) that are paid or become payable in 2021. The $10,000 maximum can be shared by individuals who share a home, including spouses and common-law partners. Eligible claimants must retain receipts and claim the SHSTC in their 2021 personal tax returns.

Ontario staycation

To support Ontario’s tourism sector, the government is exploring ways to provide Ontario residents with support of up to 20% for eligible Ontario tourism expenses, to encourage them to discover Ontario in 2021 when public health experts advise that it is safe to do so. The government will consult with stakeholders; details will be announced later.

Other measures

Property tax

The budget proposes to:

reduce the highest Business Education Tax rates for employers across Ontario to 0.88% for commercial and industrial properties, beginning in 2021
permit municipalities to:
- adopt a new optional property subclass for small business properties
- reduce property taxes to eligible small business properties

In addition, as a result of the province’s property assessment and taxation system review, Ontario will:

support creating optional new assessment tools that can be used for redevelopment areas; this is to address concerns for small businesses in redevelopment areas where there is a potential for speculative sales to impact property assessments, which can, in turn, increase a business’ property tax burden
work with stakeholders to identify options to enhance the accuracy and transparency of the complex assessment methodologies used by Municipal Property Assessment Corporation (MPAC) to assess certain types of properties, specifically large industrial facilities

Wine tax and beer tax rates

Ontario will freeze beer tax rates until March 1, 2022, and is proposing to retroactively cancel the legislated increase in wine basic tax rates that became effective June 1, 2020 (the government has issued an order under the Financial Administration Act that prevents the scheduled increase from applying between June 1, 2020 and December 31, 2020).