The 2016 Ontario Budget

Last Thursday, Ontario Finance Minister Charles Sousa delivered the provinces 2016 budget. While there were some interesting programs introduced; such as the Ontario Student Grant program for children from families making less than $50,0000, there were few new tax measures. 

I apologize to readers from other provinces, but Ontario is my home province, so I have a vested interest in this budget.

Personal Income Tax Rates

There were no new personal tax rate changes announced (not surprisingly given the tax rates below). For residents of Ontario who earn greater than $220,000, the combined Federal and Ontario tax rates are as follows for 2016:

Ontario-Federal Combined Top Marginal Personal Tax Rates for 2016
Salary	Capital Gains	Eligible Dividends	Non-eligible Dividends
53.53%	26.76%	39.34%	45.30%

I  have written previously about how the "top 1%" of income earners are no happy with these rates, so there is no need to discuss them again.

Business Income Tax Rates

 

There were no changes to the corporate tax rates. For incorporated companies carrying on business in Ontario, the tax rates are as follows:

Combined Federal and Ontario Corporate Income Tax Rates for 2016
General	M&P	Small Business
26.5%	25%	15%

The access to the 15% small business rate could be "shaken-up" if the Federal Liberals follow through in next months Federal Budget with their election promise to look at restricting the ability for certain small businesses and professionals (such as doctors, lawyers and dentists) to claim the small business deduction where they do not meet certain employee thresholds.
 

Miscellaneous Business Changes

• The government stated that the legislation for The Ontario Registered Pension Plan ("ORPP") will be implemented in the spring of 2016. Though technically not a tax, the ORPP will eventually cost businesses 1.6% to 1.9% on employee pensionable earnings up to $90,000. The impact of this substantial additional cost to employers will have to be seen; I would suggest businesses may not just happily absorb the ORPP cost and the ORPP may cost some Ontarians their jobs.
• Ontario will reduce R&D credits from 4.5% to 3.5% and the Ontario Innovation Tax Credit from 10% to 8%
• The Apprentice Training Tax Credit is under review as previously announced

Miscellaneous Personal Changes

• Ontario will discontinue tuition and education tax credits beginning in September, 2017
• The government will also discontinue the Children's Activity Tax Credit and Healthy Homes Renovation Tax Credit as of January 1, 2017
• Ontario will mirror the Federal Split Income rules for minors, whereby the top marginal Ontario rate will be applied starting January 1, 2016

So as noted above, not too much to get excited about. I have a feeling the Federal Budget may create a little more excitement.

This site provides general information on various tax issues and other matters. The information is not intended to constitute professional advice and may not be appropriate for a specific individual or fact situation. It is written by the author solely in their personal capacity and cannot be attributed to the accounting firm with which they are affiliated. It is not intended to constitute professional advice, and neither the author nor the firm with which the author is associated shall accept any liability in respect of any reliance on the information contained herein. Readers should always consult with their professional advisors in respect of their particular situation.