Ontario budget 2019: Key highlights
With the first budget of its majority mandate, Doug Ford’s Progressive Conservative government delivered a moderated strategy for achieving budgetary balance, while largely maintaining—and in the case of education and health care, even increasing—current program spending levels.
In the months leading up to the budget, the government had already delivered on several campaign promises that it says will save the province $5 billion this year alone. They include:
- Cancelling the cap-and-trade carbon levy
- Capping the minimum wage at $14 per hour
- Reducing Workplace Safety and Insurance Board premiums
- Not adopting federal measures that would have clawed back the small business deduction on the first $500,000 of active business income for Canadian controlled private corporations (CCPCs), earned when passive income in an associated corporate group exceeds $50,000
The main focus of Budget 2019 was deficit reduction, child-care support, education and health care, and transit. Major highlights include:
The Progressive Conservatives are promising a slow-and-steady return to budgetary black ink over five years. The government is predicting deficits of $11.7 billion for 2018-19, $10.3 billion for 2019-20, $6.8 billion for 2020-21 and $5.6 billion for 2021-22, before achieving a modest surplus in 2023-24.
The government will not reduce the province’s corporate tax rate by 1% as promised during the last provincial election.
To achieve the government’s promise of lowering the tax burden for corporations and business owners, Budget 2019 introduces the Ontario Job Creation Investment Incentive. The program is designed to encourage capital investment and improve cross-border competitiveness and will mirror federal capital cost allowance (CCA) measures introduced last year. The government predicts the program will deliver an extra $3.8 billion in corporate income tax relief over six years by expediting capital write-offs on certain assets. The Incentive will offer a CCA deduction of 100% on processing and manufacturing machinery and specified clean energy equipment. The federal government’s Accelerated Investment Incentive applies to most other capital assets. It offers accelerated depreciation rates in the first year an asset is put into use, at up to three times the normal depreciation rate. The program will be phased out between 2024 and 2027.
Media Tax Credit
The government is proposing to review and streamline the media tax certification process and expedite tax credit reimbursement timelines. Ontario’s existing refundable media tax credits include the Ontario Production Services Tax Credit, the Ontario Computer Animation and Special Effects Tax Credit, the Ontario Film and Television Tax Credit, the Ontario interactive Digital Media Tax Credit and the Ontario Book Publishing Tax Credit.
Ontario Interactive Digital Media Tax Credit
The government is proposing to lower the minimum labour expenditure on eligible interactive digital media products—to $500,000 from $1 million—for corporations applying for the Ontario Interactive Digital Media Tax Credit. The proposal would take effect for the tax year beginning after April 11, 2019.
The government opted not to lower income tax rates with Budget 2019. As such, Ontario’s top combined federal-provincial marginal income tax rate will remain at 53.53%, with eligible dividends taxed at 39.34%, and non-eligible dividends and capital gains taxed at 47.4% and 26.76%, respectively—all at the top marginal rate.
Estate Administration Tax
The budget proposes to eliminate the estate administration tax on the first $50,000 of an estate’s value, with an extension of the filing deadline on information returns and other related reporting requirements to 180 from 90 days, effective January 1, 2020. The estate administration tax rate will remain at 1.5% for every $1,000 on an estate’s value exceeding $50,000.
Low-income Individuals and Family Tax credit
As previously announced in the Ontario Fiscal Update, there will be a new non-refundable tax credit, the Low-income Individuals and Family Tax credit, or LIFT, that will provide low income individuals or families some tax relief. The maximum amount of the credit will be the lesser of $850 and 5.05% of employment income. The LIFT credit will be ground down when an individual’s income exceeds $30,000 or the family’s income exceeds $60,000. LIFT will not be available where an individual’s income exceeds $38,500, or the family’s income exceeds $68,500.
Budget 2019 introduces the Ontario Childcare Access and Relief from Expenses (CARE) tax credit, applicable in the current tax year. The credit is based on a family’s household income and will be calculated by multiplying the taxpayer’s eligible childcare expenses by a rate that will vary based on the taxpayer’s level of income, declining gradually and cancelling out when that income exceeds $150,000.
The government also earmarked up to $1 billion over five years in the budget for as many as 30,000 new child care spaces across the province.
Education and health care
Budget 2019 introduces a new publicly-funded dental care program for low-income seniors, while also promising 30,000 new long-term care beds and new investments in mental health and addiction support services.
The government is also pledging to reorient the provincial education curriculum with a greater emphasis on math, science and financial literacy, while stressing the importance of skilled trades.
The Tories have pledged to expand transit across the Greater Toronto Area, including a new Downtown Relief Line. Budget 2019 commits $11.2 billion in new transit infrastructure spending. Total transit expansion costs are estimated at up to $285 billion.
The government is planning to take action to combat tax avoidance and evasion with the creation of a panel of tax experts to coordinate anti-fraud activities at the federal and provincial levels.
The budget also proposes to expedite plans to cut red tape for Ontario businesses by 25 per cent by 2020, two years sooner than originally planned. Details of how the government will achieve this goal are yet to be determined.
For more on how Ontario Budget 2019 impacts your business, contact KRP Tax Partner Armando Iannuzzi at firstname.lastname@example.org. Download this summary here.