Ontario Budget Tinkers; Holds the Line on Taxes

The May 2, 2013 Ontario budget held the line on taxes but made some interesting changes that will directly affect Ontario taxpayers, especially those who count on tax credits to supplement income, and will reduce health taxes for small businesses as well, but this will be at the expense of larger businesses.

The Ontario Trillium Benefit, a refundable credit available to Ontario residents consisting of sales tax, property tax/rent rebates and Seniors Home Ownership grants will, effective with 2013 personal tax filings, now be available to Ontario residents as a lump sum payment. Currently cheques are mailed to residents on a monthly basis and effective July 2014 taxpayers will have a choice between monthly payments or one annual payment. The monthly payments would be made July 2014 to June 2015, while the annual payment would be paid in June 2015.

The Employer Health Tax is a payroll tax of 1.95% levied on employers on gross payroll in excess of $400,000 and is currently paid by all Ontario employers. The 2013 budget proposes to increase the exemption portion to $450,000 effective January 1, 2014 and then index the exemption amount every 5 years based on the Ontario Consumer Price Index. In order to offset the cost of the payroll tax reduction for small to medium size business, Ontario private-sector employers with annual payrolls in excess of $5 million will see the elimination of the exempt portion, thereby increasing their payroll taxes by $7,800 per year.

The Apprenticeship Training Tax Grant results in a refundable tax credit to encourage employers to hire and train apprentices in skilled trades. Effective March 31, 2014, expenditures incurred for the following Information Technology Trades will no longer qualify for the Apprenticeship Training Tax Credit:

• Information Technology – Contact Centre – Technical Support Agent (classification 634a)
• Information Technology – Contact Centre – Inside Sales Agent (classification 634d)
• Information Technology – Contact Centre – Customer Care Agent (classification 634e)

Corporate Tax Rates Frozen. The budget reaffirmed the government's intention to continue to freeze corporate tax rates at the current level until such time as the deficit is eliminated. The budget also mirrors a number of Federal Tax Measures announced in the federal March 22, 2013 budget relating to businesses and investors:

• Accelerated CCA for manufacturing, processing machinery, and equipment as well as Clean Energy Generation equipment
• Dividend Tax Credit adjustments
• Lifetime Capital Gains exemption on qualifying small business shares, farm, and fishing properties
• Restricted farm losses
• Elimination of deduction for safety deposit boxes
• Corporate and trust loss trading restrictions
• Character conversion transactions and leveraged life insurance arrangements
• Ontario legislation to introduce disclosure rules for aggressive tax avoidance transactions

Pooled Registered Pension Plans. While the Ontario government stopped short of introducing legislation to implement Pooled Registered Pension Plans they did announce their intention to consult with interested parties to determine how PRPPs should be implemented as a retirement savings option citing the need to ensure that plan members are adequately protected and low-cost objectives are met. The budget also reiterated their intention to move ahead on regulatory changes related to target benefits in eligible multi-employer pension plans, originally announced in 2010.

This report was filed by Alan Rowell, MFA, DFA–Tax Services Specialist, President of The Accounting Place.