Ontario Finance Minister Vic Fedeli introduced the 2019 provincial budget (“Budget”) on April 11, 2019. No significant tax changes were introduced in the Budget which focused more on putting “people first”. The government promises to balance the budget by 2023-2024 while projecting to provide $26 billion in relief to Ontario individuals, families and businesses over six years, through various tax measures highlighted below.
Ontario Childcare Access and Relief from Expenses
The government proposes a new refundable Ontario Childcare Access and Relief from Expenses (CARE) tax credit, starting with the 2019 tax year. The CARE tax credit would be available in addition to the existing child care expense deduction and would provide low-income families with a monetary relief. The credit starts at a rate of 75% of eligible child care expenses for families with income less than $20,000 and is gradually reduced until the family income reaches $150,000. Starting with the 2021 tax year, Ontario intends to provide families with the choice to apply for regular advance payments throughout the year or receive a single payment when filing their tax returns after the year ends.
The Low-income Individuals and Families Tax (LIFT) Credit
The LIFT Credit was previously announced in the 2018 Ontario Economic Outlook and Fiscal Review (a copy of our commentary can be found here. Effective January 1, 2019, the non-refundable LIFT credit will provide up to $850 in Ontario Personal Income Tax relief to low-income Ontario taxpayers. This credit will be available for single individuals with adjusted net income of $38,500 or less and family units with combined adjusted family net income of $68,500.
Estate Administration Tax
Estate Administration Tax (commonly known as “Probate Tax”) is charged on the value of an estate. The Budget proposes to eliminate the Probate Tax on the first $50,000 of the value of the estate. This translates into savings of $250. The Probate Tax would continue to apply to the value of the estate exceeding $50,000 at the current rate of 1.5%. This proposed measure comes into effect for estate certificates requested on January 1, 2020 or later.
Passive Income Rules and Small Business Deduction (SBD)
As previously announced in the 2018 Ontario Economic Outlook and Fiscal Review, the Budget confirms the Ontario government will not parallel a Federal restriction that phases out the SBD when a group of associated corporations earns between $50,000 and $150,000 of passive investment income in a taxation year.
Ontario Job Creation Investment Incentive
Similar to measures announced in the Federal Budget, the Ontario Budget confirms accelerated investment incentives that will allow businesses that acquire capital property on or after November 21, 2018, but before 2028, to be eligible for an enhanced first-year CCA deduction. The measures allow the immediate write off of manufacturing and processing machinery and equipment and specified clean energy equipment. Other capital investments will be eligible for an accelerated depreciation rate. As a result of implementing these measures, the government will not proceed with the anticipated 1% reduction to the Ontario corporate tax rate.
Ontario Interactive Digital Media Tax Credit
The Ontario Interactive Digital Media Tax Credit is a refundable tax credit available to qualifying corporations for expenditures related to eligible interactive digital media products. To qualify as a specialized digital game corporation, a company must spend at least $1 million in its taxation year on Ontario labour expenditures for eligible digital games. The Budget proposes to reduce the minimum expenditure to $500,000 allowing smaller video game developers to access the tax credit. This proposal would be effective for taxation years commencing after April 11, 2019.
Please contact Fazzari + Partners LLP if you have any questions. We can offer the tax advices that best meet your unique circumstances.
The information in this article is of a general nature and is in summary form and may not include all the details noted in the Budget. Contact one of our tax professionals to discuss these matters in the context of your situation before acting upon such information.