2021 Ontario budget: Tax highlights

Issue 2021-05

In brief

On March 24, 2021, Ontario’s Minister of Finance, Peter Bethlenfalvy, presented the province’s budget. The budget does not change corporate or personal income tax rates, but does:  

• introduce the temporary refundable Ontario Jobs Training Tax Credit, providing up to $2,000 to individuals with eligible training expenses in 2021

• temporarily increase the Regional Opportunities Investment Tax Credit rate to 20%, for qualifying investments that become available for use after March 23, 2021 and before January 1, 2023

• provide a second round of Ontario Small Business Support Grant payments to eligible small businesses and introduce an alternative Ontario Tourism and Hospitality Small Business Support Grant

• enhance the Childcare Access and Relief from Expenses (CARE) tax credit for 2021

This Tax Insights discusses these and other tax initiatives outlined 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.

Regional Opportunities Investment Tax Credit

The budget proposes to temporarily double the Regional Opportunities Investment Tax Credit (ROITC) rate from 10% to 20%, for qualifying investments that become available for use after March 23, 2021 and before January 1, 2023. The ROITC is a refundable corporate income tax credit that is available for CCPCs that make qualifying investments in eligible geographic areas of Ontario. The proposed enhancement will increase the maximum credit to $90,000 per taxation year.

Ontario Small Business Support Grant

The budget proposes to provide a second round of payments (in the amount of $10,000 to $20,000) to eligible small businesses under the Ontario Small Business Support Grant. Small businesses that have already qualified for this grant will automatically be entitled to a second payment in an amount equal to the first payment they received (effectively doubling the grant) and will not need to apply again to receive this additional funding.

This grant was launched in January 2021 and is available to small businesses that were required to close or significantly restrict services under the Provincewide Shutdown effective December 26, 2020. Eligible businesses must have less than 100 employees and have experienced a revenue decline of 20% or more. 

Ontario Tourism and Hospitality Small Business Support Grant

The budget introduces the Ontario Tourism and Hospitality Small Business Support Grant, which will provide one‐time payments of $10,000 to $20,000 to eligible small businesses. Businesses that have less than 100 employees and have experienced a revenue decline of 20% or more are eligible to apply.  

Eligible businesses include hotels, motels, travel agencies, amusement and water parks, hunting and fishing camps, and recreational and vacation camps. Additional details will be provided by the provincial government at a later date. Small businesses that received the Ontario Small Business Support Grant (see above) are not eligible for this new grant.

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. 

Ontario Jobs Training Tax Credit

The budget introduces the Ontario Jobs Training Tax Credit, a temporary refundable personal tax credit, available for 2021. Eligible individuals can claim 50% of eligible expenses, up to a maximum benefit of $2,000, if they: 

• are resident in Ontario on December 31, 2021

• have a Canada training credit limit for 2021 greater than zero

• are aged 26 to 65 at the end of 2021   

Eligible expenses are the same as those that can be claimed for the Canada training credit, which can include training programs in a number of fields (e.g. personal support worker, graphic design, heavy machinery) or postsecondary courses that provide credits towards a degree, diploma or certificate. An individual can obtain their training credit limit from their latest 2020 notice of assessment or reassessment as provided by the Canada Revenue Agency. 

Individuals will claim the Ontario Jobs Training Tax Credit on their 2021 personal income tax returns.

Childcare Access and Relief from Expenses (CARE) tax credit

The budget temporarily enhances the Childcare Access and Relief from Expenses (CARE) tax credit for 2021. The enhancement will equal 20% of the calculated CARE tax credit entitlement for 2021, and will be paid when parents file their 2021 personal income tax returns. 

Ontario COVID-19 Child Benefit

The budget will provide a third round of payments to parents through the Ontario COVID-19 Child Benefit in the amount of $400 per child in grade 12 or under, and $500 for children and youth 21 years or younger with special needs. Parents who had previously applied for and received the benefit do not need to apply again.  

Other measures

Property tax

The Ontario property tax reassessment that was scheduled to be conducted in 2020, for the 2021 taxation year, was previously postponed due to the COVID-19 pandemic. The budget further postpones the property tax reassessment and the provincial government will seek input from Ontario municipalities, taxpayers and interested stakeholders regarding the timing and valuation date for the next reassessment.

Anti-avoidance rules

Ontario supports the federal government’s plan to consult on modernizing Canada’s anti‐avoidance rules, specifically the General Anti‐Avoidance Rule (GAAR). Ontario encourages the federal government to consider ways to combat artificial income shifting, such as through the use of trusts or corporate continuances, that put provincial tax revenue at risk.

Technical amendments

Ontario may amend its provincial statutes to:

• improve administrative effectiveness or enforcement

• maintain the integrity and equity of its tax and revenue collection system, or

• enhance legislative clarity or flexibility to preserve policy intent