Resources

2018 Provincial Budget Commentary

On March 28, our Provincial Government presented its 2018 Budget “A Plan for Care and Opportunity.”

While the budget announces a surplus of $0.6 billion for 2017-18, significant spending increases will put the province in deficits of $6.7 billion for 2018-19 and $6.6 billion for 2019-20.

This article outlines various highlights of the 2018 Ontario Budget.

Corporate Income Tax:

  • Ontario will parallel federal tax measures on income sprinkling by private companies and passive investment income of private companies.
  • The budget provides increased tax credit rates for the Ontario Research and Development Tax Credit and the Ontario Innovation Tax Credit for qualifying companies.
  • There are no changes to Ontario’s corporate income tax rates which remain as follows:

Corporate Income Tax Rates – As of January 1, 2018

 Ontario  Combined Federal and Ontario
General 11.5 26.50%
M&P: Manufacturing or Processing 10 25.00%
Small Business1 3.5 13.50%2
1 On first $500,000 of active business income.
2 This rate reflects the Federal government’s proposal to reduce the federal small business tax rate to 10% (from 10.5%) as of January 1, 2018.

 

Employer Health Tax:

The provincial government is proposing changes to the Employer Health Tax (EHT) exemption to limit the availability of the exemption. The proposed change would result in only Canadian controlled private corporations (CCPC), partnerships, charities, not-for-profit organizations, private trusts, and individuals being eligible for the exemption starting January 1, 2019.

Personal Income Tax:

  • In an effort to simplify the calculation of personal income taxes, the budget proposes to eliminate Ontario’s personal income surtax and adjust the personal income tax brackets and rates, effective for 2018.
  • Currently, Ontario has five personal income tax rates plus two surtaxes calculated separately. The proposed changes would replace these with seven personal income tax brackets applied directly to taxable income.
  • The proposed changes (see table below) would be effective for the 2018 year and generate additional funds for the province starting in 2018-2019.

Current & Proposed 2018 Ontario Personal Income Tax Rates & Brackets

Other Significant Changes

Charitable Giving

The government is proposing to increase the top rate of the non-refundable Ontario Charitable Donations Tax Credit (OCDTC). The OCDTC rate for donations made in excess of the first $200 per year will increase to 17.5% for all taxpayers. This measure is meant to give more tax relief to lower income donors. Some higher income earners will realize a very small (less than 1%) decrease in the OCDTC rate due to the elimination of the surtax.

Child Care

Beginning in September 2020, Ontario will fully fund licensed child care for preschool-aged children from the age of two-and-a-half until kindergarten.