Overview: The Provincial Budgets

Evelyn Jacks

Two provincial budgets were released on either side of the Easter Weekend:  Ontario’s on March 26 and Manitoba’s on April 2, and their approaches were entirely different: one reflecting few taxes changes (but a promise of tax reform!); the other a plethora of broad-reaching new ones that will raise taxes and increase complexity.  Here’s what you need to know:

The March 26, 2024 Ontario Budget.  This provincial budget promised several taxation system reviews and some tax relief for motorists and wine tasters.  Specifically,  a review of Ontario’s tax system was initiated in the 2023 Budget, but since consultations with expert, economists and business leaders continue without conclusions.  This budget is initiating a second review; this time of the property tax assessment system.  Two other tax measures introduced include:

1. The Temporary Gas Tax and Fuel Tax Rate cuts of 9 cents per litre, which has been extended to December 31, 2024.
2. It is proposed that the basic tax on wine levied on the sale of Ontario wine and wine coolers in on-site winery retail stores will be removed starting on April 1, 2024.

The two measures will cost $1.2 Billion.

The April 2, 2024 Manitoba Budget.  In a surprise move, Manitoba is planning to claw back the Basic Personal Amount, starting with tax year 2025.  The BPA is estimated to be $16,206 and the clawback will be based on net income,  Line 23600 of the federal T1.  The clawback amount will be 8.1 cents per dollar for every dollar over $200,000; with the full basic amount clawed back when net income reaches $400,000.  If fully clawed back, the provision will cost those taxpayers approximately $1750 more  (10.8% x $16,206).

This could pour cold water on the ambitious plan to attract 100 more physicians to the province, in addition to 200 more nurses, 90 more paramedics and 600 more aids; although these resources will likely come at lower income levels.

Depending on the final calculations (not presented with the Budget), this calculation, based on net income, could also increase taxes for high earners who qualify for the Northern Residents Deduction, or for those with one-time transactions like the sale of a farm or business which normally qualify for the capital gains exemption.  It may also affect retired business owners who generate a larger portion of retirement income from private dividends.  

In other news, in order of proposed implementation date:

Retroactive to 2023 – 1 New Measure:

1. 2023:EV Rebate. Retroactive to August 1, 2023, buyers of new Electric Vehicles or hybrids can receive a $4000 rebate for a new car purchase or a $2500 rebate for a used one.

Tax Year 2024 – 11 New Measures

1. 2024:Effective April 1, 2024 there will be 5% rate decrease for car insurance in Manitoba.   
2. 2024:The Gas Tax Cut of 14 cents per litre of gas was extended to the end of September.
3. 2024:Qualified Disability Trusts will be the subject of a retroactive “recovery” tax if the funds are not disbursed as intended to the beneficiary.  Department officials noted this can be applied to reverse all the preferred tax treatment to the creation of the trust.   
4. 2024:Land Transfer Tax – New penalties will apply when there are inaccuracies or misrepresentations in valuation of properties.
5. 2024:  Fertility Tax Credit.  This refundable tax credit, currently 40% of fees paid to Manitoba clinic to a maxim of $20,000 for an $8000 maximum credit, will double to $40,000 and $16,000 respectively.  Eligible costs include the fees paid to fertility clinics and drugs.
6. 2024:  New Small Supplier Threshhold for Retail Sales Taxes.  Effective January 1, 2024 there will be a new small supplier threshold to exempt retail sales collections on taxable sales under $30,000 as opposed to the current $10,000.  However the sales commissions currently paid to small suppliers will be eliminated as of April 2024.     
7. 2024:Rental Housing Construction Tax Credit.For tax year 2024 construction companies that build new “market rate” rental units ill receive a refundable tax credit of $8500 for each construction start. There was no end date mentioned in the budget documents for this provision.  For construction of “affordable rental units” over the next 10 years, the credit will be $13,500 with $5000 of this being a non-refundable tax credit.
8. 2024:  Interactive Digital Media Tax Credit.    The expenses must be claimed in the year the costs are incurred.  A special exemption from the requirement to produce a certificate of eligibility will be granted to video game companies claiming this credit.
9. 2024:Statute of Limitations, Audits.  The province clarified that this is now 6 years from the notification period and this will include Oil and Gas Production tax records. The province can go back further in the case of misrepresentation.
10. 2024:  Fee Reduction for Clearance Certificates.  The $50 fees for clearanace certificates will be waived as will the $300/$500 fees for Advanced Tax Rulings. 

Tax Year 2025 – Six New Provisions

1. The Basic Personal Amount Clawback.  Manitoba is planning to claw back the Basic Personal Amount, starting with tax year 2025.  The BPA is estimated to be $16,206 and the clawback will be based on net income,  Line 23600 of the federal T1.  The clawback amount will be 8.1 cents per dollar for every dollar over $200,000; with the full basic amount clawed back when net income reaches $400,000.  If fully clawed back, the provision will cost those taxpayers approximately $1750 more  (10.8% x $16,206).
2. 2025:  New Homeowners Affordability Tax Credit.  The Education Property Tax Credit will be replaced with the new Homeowners Affordability Tax Credit, which will offer a flat rebate of $1500 to eliminate education property taxes for those with homes valued under $437,000; otherwise homeowners can expect their property taxes to increase as a result of this measure.  Farmers will still receive their same School Tax Rebate.  There will be no education tax reduction or relief for commercial properties (although a new taxing model is under consultation) or for apartment owners.
3. 2025:Increased Renters Tax Credit.  This credit will increase $50 to $575 from the current $525   and seniors will see a top up of $28. 
4. 2025:A New Vaping Tax.The province is doubling up on the federal rates to apply their own version of this tax.  
5. 2025:The Data Processing Investment Tax Credit.  This was eliminated for tax year 2025.
6. 2025:The Cultural Industries Printing Tax Credit was extend to December 31, 2025 to provide a 35% credit for salaries and wages paid.