Ontario Budget Tax Measures – February 25, 2016

The bad news? The Ontario budget is introducing $1.3 Billion in tax hikes over three years and the annual debt servicing costs on a total debt of $325.3 Billion will be $11 Billion. The good news?

The February 25, 2016 Ontario provincial budget will introduce the Ontario Student Grant to replace non-refundable tuition and education tax credits, and will provide free post-secondary education to families with incomes under $50,000.

The graduates of tomorrow who benefit from these changes should be better equipped to deal with their future tax burden, not only because the cost of their post-secondary education will be lower, but also because the higher learning they’ll be able to pursue will enable them to earn higher income, assuming they will be successful in finding jobs in Ontario.

A summary of the proposed personal tax changes in the 2016 Ontario budget includes the following:

• The Tuition and Education Tax Credits will be eliminated September 5, 2017. Carry-forwards from before that date will be allowed but taxpayers who move to Ontario after 2017 will not be allowed to claim amounts carried forward from their old province of residence. The Ontario Student Grant is proposed to replace the tuition and education credits. More than 50% of families with incomes under $83,000 will receive grants that they will not have to repay.
• The Children’s Activity Tax Credit will be eliminated after 2016.
• The Healthy Homes Renovation Tax Credit will be eliminated after 2016.
• The dividend tax credit rate for other-than-eligible dividends will be reduced from 4.5% of taxable dividends to 4.2863% of eligible dividends for 2016 because of the federal change in gross-up. This rate will be adjusted again in 2017, 2018, and 2019.
• The Kiddie Tax or Tax on Split Income will attract a top marginal tax rate of 20.53% but no Ontario surtax will be charged effective January 1, 2016.
• Tax simplification is being contemplated: The province is looking at ways to make the Ontario tax system easier to understand. This may involve changes to, or elimination of, the provincial surtaxes and tax reductions.

Corporate tax changes introduced include the following:

• The Ontario R&D Tax Credit rate will be reduced from 4.5% to 3.5% for taxation years ending after March 31, 2016. This credit is available to Ontario corporations who carry on scientific research and experimental development in Ontario.
• The Ontario Innovation Tax Credit will be reduced from 10% to 8% for taxation years ending after March 31, 2016.

In other news, tobacco taxes increased February 26, 2016, and alcohol taxes will increase June 2016, April 2017, April 2018, and April 2019.

For those saving for retirement, there is news on the Ontario Retirement Pension Plan (ORPP): To support the launch of the ORPP in 2017, with collections beginning in 2018, the Administration Corporation would proceed with the following updated implementation timelines for the collection of premiums on the new ORPP:

Pooled Registered Pension Plans (PRPPs): The government is introducing amendments to the Pooled Registered Pension Plans Act, 2015, to further facilitate harmonization with other jurisdictions and ensure the efficient operation of PRPPs. Regulations to support the implementation of PRPPs in the province are under development. The government will also be developing an appropriate test to determine comparability for the purposes of the ORPP.

Refer a Friend	Research	Calculators	Course Trials