On March 23, 2023 the Ontario Provincial Government released their 2023 Budget called Building a Strong Ontario.
This commentary summarizes the highlights focusing on tax changes and measures affecting individuals and businesses. The full budget document is available on this link.
Deficit, Jobs & GDP
Ontario’s 2022–23 deficit is projected to be $2.2 billion — $17.7 billion lower than the outlook published in the 2022 Budget.
The government is projecting a deficit of $1.3 billion in 2023–24 and is on track to post a surplus of $0.2 billion in 2024–25.
Ontario created 338,300 jobs (+4.6 per cent) in 2022. In fact, 2021 and 2022 are the two strongest years of job growth for Ontario on record. Ontario’s unemployment rate is near historic lows.
Ontario’s real GDP grew by an estimated 3.7 per cent in 2022 and is projected to increase by 0.2 per cent in 2023, 1.3 per cent in 2024, 2.5 per cent in 2025 and 2.4 per cent in 2026.
CORPORATE INCOME TAX MEASURES
The corporate income tax rates are unchanged.
|Corporate Income Tax Rates
As of January 1, 2023
Federal and Ontario
|M&P: Manufacturing or Processing||10.0%||25.0%|
|Canadian-controlled Private Corporations1||3.2%||12.2%|
|1On first $500,000 of active business income.|
Ontario Made Manufacturing Investment Tax Credit (OMTC)
The new “Ontario Made Manufacturing Investment Tax Credit” is available to Canadian controlled private corporations (CCPCs) with a permanent establishment in Ontario and which make qualifying capital investments in buildings, machinery and equipment used in manufacturing or processing. The OMTC is a 10 per cent refundable corporate income tax credit available for expenditures for certain capital property included in Class 1 or Class 53 for capital cost allowance (CCA) purposes, up to a limit of $20 million in a taxation year. As a result, a corporation may receive a tax credit of up to $2 million a year.
Extension of the Small Business Deduction (SBD)
Canadian-controlled private corporations (CCPC’s) have access to the Small Business Deduction (SBD) on their first $500,000 of profits from active business income. The small business deduction starts to be eroded when a company’s taxable capital exceeds $10 million and is fully eliminated when it exceeds $15 million. The Ontario government proposes to extend this deduction to larger CCPC’s by extending the phase‐out range for Ontario’s small business corporate income tax rate to between $10 million and $50 million of taxable capital employed in Canada. This proposed measure would apply to taxation years that begin on or after April 7, 2022 to align with the change made by the federal government
PERSONAL TAX MEASURES
The personal income tax rates are unchanged.
|2023 Top Marginal Personal Income Tax Rates
Combined Federal / Provincial
|Interest and regular income||53.53%|
GAINS – Guaranteed Annual Income System Payments
The Ontario government has expanded the Guaranteed Annual Income System (“GAINS”) program by doubling the payment for low-income seniors for the calendar year 2023. The maximum payment for 2023 was increased to $166 per month for single seniors and $332 per month for couples. Eligibility for seniors may be expanded further starting in July 2024.
Disclaimer: This article is intended to inform readers in general terms. It is not intended to provide any tax or business advice. Please consult your Stern Cohen advisor if you have any questions about your unique situation. While we have tried to ensure the accuracy of the information in this article, we accept no liability for errors or omissions.