The budget is heavy on spending cuts and government restraint; however, I will leave the political pundits to deal with those issues. Personally, I see little chance the Liberal government will eliminate the deficit by 2017-2018, because of the inherent issues the province has, essentially caused by the loss of the manufacturing sector.
Personal Income Tax Measures
Ontario Trillium Benefit
As noted in my blog last week, many Ontarians have been surprised that they are not receiving refunds upon filing their income tax returns, as the sales tax and property tax credits are now part of a monthly Ontario Trillium Benefit. Many Ontarians were unhappy with the monthly payment voicing complaints in this regard (at least in newspapers and blogs). In the budget the government notes that “Ontarians are now receiving their refundable tax credits earlier and more frequently than if they were paid as a lump sum when people file their tax returns”, however, they seem to have listened to the people and now say that they will look at options for providing a choice of a monthly payment or lump sum amount after the year has ended.
Ontario Drug Benefit Program
Starting in August, 2014, single seniors with an income greater than $100,000 will now have to pay a deductible of $100 (the current deductible) plus 3 per cent of their income.
For couples with an income above $160,000, the deductible will rise to $200 per couple plus 3 per cent of the family income.
Healthy Homes Renovation Tax Credit
The government provides a reminder of its Healthy Homes Renovation Tax Credit for renovations that improve accessibility or help seniors with their mobility at home. Details of the credit are noted here.
The credit would be worth up to $1,500 each year, calculated as 15 per cent of up to $10,000 in eligible home renovation expenses that would help seniors stay safely in their homes. It could be claimed by senior homeowners and tenants, and people who share a home with a senior relative.
Corporate Income Tax Measures
The Ontario corporate income tax rate was scheduled to fall from the current 11.5% to 11% July 1, 2012 and 10% on July 1, 2013. The 11.5% rate is being frozen until the Ontario budget is balanced (thus, I guess this rate will be in effect forever :).
The corporate rate for Manufacturing and processing companies will also be frozen at 10%.
For Canadian Controlled Private Corporations, the corporate rate will be frozen at 4.5%
Business Education Tax
The government proposes to freeze the Business Education Tax (“BET”) reduction plan beginning in 2013. The government says they will ensure businesses building new facilities will benefit from the full implementation of the BET reductions.
Scientific Research and Development
Ontario did not make any changes to the Scientific Research and Development (R&D) program. They are essentially going to piggyback the Federal government. The budget comments that Ontario agrees with the federal panel that there is a need for greater federal-provincial collaboration regarding R&D tax support. As the federal panel suggested a reduction in federal R&D support, simplification of the program and a reduction in compliance costs, Ontario companies undertaking R&D will be impacted by any federal changes. It is expected the federal government will address R&D in Thursday’s federal budget.
The government says that it will review the effectiveness of the Ontario Apprenticeship Training Credit and consider linking support to the completion of apprenticeships.
The Underground Economy
Ontario plans to adopt measures similar to Quebec to address the tax leakage from the underground economy. These measures include:
· measures to mitigate the use of point-of-sale software to conceal sales.
· Measures to enhance information sharing across Ontario ministries and with the CRA.
· Measures to help identify those who facilitate or participate in tax evasion schemes.
Corporate Tax Avoidance
Again, using Quebec as the model, Ontario will consider implementing various measures used by Quebec to fight aggressive tax planning. It should be noted Quebec measures include a requirement for taxpayers to disclose any transaction in which they retained an advisor and there was a tax benefit of at least $25,000, or the taxpayer’s income was affected by $100,000 or more. Thus, some real “Big Brother” measures.
Employer Health Tax
Ontario plans to strengthen its administrative practice in the determination of whether an employer-employee relationship exists. In common language, watch out if you engage contractors.
The blogs posted on The Blunt Bean Counter provide information of a general nature. These posts should not be considered specific advice; as each reader's personal financial situation is unique and fact specific. Please contact a professional advisor prior to implementing or acting upon any of the information contained in one of the blogs.