On Wednesday, March 24, 2021, Ontario’s Minister of Finance Peter Bethlenfalvy tabled the province’s 2021 Budget. The Budget, titled Ontario’s Action Plan: Protecting People’s Health and Our Economy, continued with the prior year’s commitment to significant investment in health care and support for families, workers and employers.
The Province projects a deficit of $38.5 billion for 2020-21 and forecasts deficits of $33.1 billion in 2021-22, $27.7 billion in 2022-23 and $20.2 billion in 2023-24.
Below are highlights from the announcement from our accounting partner, MNP:
1. Corporate Tax Measures
Corporate Tax Rates
No new corporate income tax rate changes were announced in this year’s budget. The current corporate income tax rates for 2021 are outlined below:
| Small Business Corporations | General Corporations
|
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| Rate | Threshold | Non-M&P | M&P | |
| Federal | 9.0% | $500,000 | 15.0% | 15.0% |
| Ontario | 3.2% | $500,000 | 11.5% | 10.0% |
| Combined | 12.2% | 26.5% | ||
Regional Opportunities Investment Tax Credit
The Regional Opportunities Investment Tax Credit is a 10-percent refundable corporate income tax credit available to Canadian-controlled private corporations that make qualifying investments in eligible geographic areas of Ontario. The tax credit is available for eligible expenditures in excess of $50,000 and up to $500,000 in a year, for investments that become available for use on or after March 25, 2020.
Budget 2021 proposes to temporarily double the Regional Opportunities Investment Tax Credit rate, allowing corporations to claim a 20-percent credit. The enhanced credit would be available for eligible expenditures in excess of $50,000 and up to $500,000 for property that becomes available for use in the corporation’s taxation year, and in the period beginning on March 24, 2021 and ending before January 1, 2023.
Qualifying investments are eligible expenditures for capital property included in Class 1 and Class 6 for purposes of calculating capital cost allowance. Qualifying investments include expenditures for constructing, renovating or acquiring eligible commercial and industrial buildings and other assets.
2. Personal Tax Measures
Personal Tax Rates
No new personal income tax rate changes have been announced in this year’s budget. The top marginal personal income tax rate for Ontario is 20.53 percent for 2021. The current top combined federal and Ontario marginal rates for 2021 are outlined below:
Salary, business income, interest 53.53%
Capital gains 26.76%
Eligible dividends 39.34%
Non-eligible dividends 47.74%
Childcare Access and Relief from Expenses (CARE) Tax Credit
Budget 2021 proposes a temporary increase in the support provided by the CARE tax credit. This increase allows a one-time top-up for CARE tax credit recipients equal to 20 percent of their 2021 credit entitlements.
The CARE tax credit provides families with flexible childcare support of up to 75 percent of their eligible childcare expenses. The top-up would be calculated when families file their 2021 personal income tax returns.
Ontario Jobs Training Tax Credit
The Government is proposing a new temporary Ontario Jobs Training Tax Credit for 2021. This personal income tax credit would be refundable and provides support to eligible individuals whether or not they owe income tax for 2021. It would be calculated as 50 percent of eligible expenses for 2021, with a maximum credit of $2,000.
Individuals would be able to claim the temporary credit on their 2021 personal income tax returns if the following conditions are met:
They are resident in Ontario on December 31, 2021; and they have a Canada training credit limit for 2021 greater than zero.
An individual’s Canada training credit limit for 2021 can be found on their latest notice of assessment or reassessment for 2020, as provided by the Canada Revenue Agency. Eligible claimants for the credit would be at least 26 years of age, and not older than 65 years of age, at December 31, 2021.
Eligible expenses would be the same as those claimed for the Canada training credit, including tuition and other fees paid to an eligible educational institution in Canada for courses taken in 2021, or fees paid to certain bodies in respect of an occupation, trade or professional examination taken in 2021.
3. Other Measures
Ontario COVID-19 Child Benefit
The Province is automatically providing a third round of payments to parents who received Support for Learners payments, which are now being doubled. Every eligible parent will receive $400 for each child aged 0 to Grade 12, and $500 for children and youth 21 years old or younger with special needs. Parents who had not applied for the previous payments will be able to submit an application for this third payment round.
Ontario Small Business Support Grant
Budget 2021 announced that an additional round of support will be provided through the Ontario Small Business Support Grant. Small businesses which have previously been determined as eligible recipients of the grant will automatically be entitled to a second payment in an equal amount to the first payment they received. Recipients will not need to reapply to receive the additional funding.
Ontario Tourism and Hospitality Small Business Support Grant
The Government is introducing a new Ontario Tourism and Hospitality Small Business Support Grant, which will provide an estimated $100 million in one-time payments of $10,000 to $20,000 to eligible small businesses. Businesses must demonstrate they have experienced a minimum 20-percent revenue decline and have less than 100 employees to qualify. Any small businesses that received the Ontario Small Business Support Grant will not be eligible for this new grant.
The Province also announced that it intends to introduce legislation for a tax credit to encourage residents to explore Ontario when public health experts advise that it is safe to travel.
Modernizing Anti-Avoidance Rules
Ontario supports the Federal Government’s plan to consult on the modernization of Canada’s anti-avoidance rules, in particular the General Anti-Avoidance Rule (GAAR). As part of the consultation, the province 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.
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