On March 24, the Ontario government tabled the 2021 Ontario Budget – Ontario’s Action Plan: Protecting People’s Health and our Economy – which outlines the government’s $186 billion spending plan focused on two key priorities: health and economic recovery. This article summarizes key business and personal tax and other measures outlined in the 2021 Ontario Budget.
Personal and Corporate Tax Rates
The budget does not propose changes to corporate or personal income tax rates.
Business Tax Measures
Doubling the Ontario Small Business Support Grant
The government announced that an additional round of support will be provided through the Ontario Small Business Support Grant. Small businesses who have been determined as eligible recipients of the Ontario Small Business Support Grant will automatically be entitled to a second payment in an amount equal to the first payment they received. They will not need to apply again to receive this additional funding.
Ontario launched the Ontario Small Business Support Grant in January 2021, which provides a minimum of $10,000 and a maximum of $20,000 to help eligible small businesses that were required to close or significantly restrict services under the provincewide shutdown that came into effect in December 2020. Businesses must demonstrate they have experienced a minimum 20 per cent revenue decline and have less than 100 employees to qualify. Application closing date is March 31, 2021.
Ontario Tourism and Hospitality Small Business Support Grant
The government is introducing the new Ontario Tourism and Hospitality Small Business Support Grant, which will provide one‑time payments of $10,000 to $20,000 to eligible small businesses. These eligible small businesses can apply for support to help them recover from the impacts of COVID‑19 as well as to help create and protect jobs. Businesses must demonstrate they have experienced a minimum 20 per cent revenue decline and have less than 100 employees to qualify.
Enhancing the Regional Opportunities Investment Tax Credit
The government is proposing to temporarily double the Regional Opportunities Investment Tax Credit (ROITC) rate. The proposed enhancement would allow corporations to claim a 20 per cent credit, increasing the maximum credit to $90,000 per taxation year.
The ROITC is a 10 per cent refundable Corporate Income Tax credit available to Canadian-controlled private corporations that make qualifying investments in eligible geographic areas of Ontario. The tax credit is available for eligible expenditures in excess of $50,000 and up to $500,000 in a year, for investments that become available for use on or after March 25, 2020.
The enhanced credit would be available for eligible expenditures in excess of $50,000 and up to $500,000 for property that becomes available for use in the corporation’s taxation year, and in the period beginning on March 24, 2021 and ending before January 1, 2023. “Available for use” refers to the rules set out in the federal Income Tax Act that determine the taxation year in which a taxpayer can start to claim capital cost allowance for a depreciable property. Qualifying investments are eligible expenditures for capital property included in Class 1 and Class 6 for the purposes of calculating capital cost allowance. Qualifying investments include expenditures for constructing, renovating or acquiring eligible commercial and industrial buildings and other assets.
Personal Tax Measures
Temporary Ontario Jobs Training Tax Credit
The government is proposing a new temporary Ontario Jobs Training Tax Credit for 2021. This Personal Income Tax credit would be refundable and provide support to eligible individuals whether or not they owe income tax for 2021. It would be calculated as 50 per cent of eligible expenses for 2021. The maximum credit would be $2,000.
Individuals would be able to claim the Ontario Jobs Training Tax Credit on their 2021 Personal Income Tax returns if they meet the following conditions:
- are resident in Ontario on December 31, 2021; and
- have a Canada training credit limit for 2021 greater than zero; and
- are aged 26 to 65 at the end of 2021.
An individual can find their Canada training credit limit for 2021 on their latest notice of assessment or reassessment for 2020, which is provided by the Canada Revenue Agency (CRA). To have a positive Canada training credit limit for 2021, an individual must have met age and income conditions, among other requirements set out in the federal Income Tax Act, for 2019 or 2020.
Eligible expenses would be the same as those that can be claimed for the Canada training credit. These include tuition and other fees paid to an eligible educational institution in Canada for courses taken in 2021, or fees paid to certain bodies in respect of an occupational, trade or professional examination taken in 2021.
Expenses Eligible for the Ontario Jobs Training Tax Credit include:
- Occupational Skills Courses – Fees for occupational skills courses if they are paid to a university, college or certain other educational institutions, if the student is enrolled in the institution to obtain or improve their skills in an occupation.
- Occupational, Trade or Professional Exams – Fees for an occupational, trade, or professional examination required to obtain professional status, or to be licensed or certified as a tradesperson, and that are paid to a university, college or other educational institution, a professional association, provincial ministry, or other similar institution.
- Postsecondary Education Courses – Fees for one or more courses at the postsecondary level can qualify, if the courses provide credit towards a degree, diploma or certificate.
Enhancing the CARE Tax Credit for 2021
The government is proposing a temporary increase in the support provided by the Childcare Access and Relief from Expenses (CARE) tax credit for 2021. This increase would provide a one-time top-up for CARE tax credit recipients equal to 20 per cent of their 2021 credit entitlements. This would increase 2021 support from the CARE tax credit for recipients from about $1,250 to about $1,500, on average.
Introduced in 2019, the CARE tax credit provides families with flexible child care support of up to 75 per cent of their eligible child care expenses. The CARE tax credit is provided in addition to the Child Care Expenses Deduction and focuses on lower- and moderate-income families.
The CARE tax credit is based on a tax filer’s:
- Family income, based on the income used in determining the tax filer’s Child Care Expenses Deduction; and
- Eligible child care expenses, defined as the tax filer’s total entitlement under the Child Care Expenses Deduction.
The top-up would be 20 per cent of the calculated CARE tax credit entitlement for 2021 and delivered when families file their 2021 Personal Income Tax returns.
Supporting Families through the Ontario COVID‑19 Child Benefit
The government is providing a third round of direct payments to parents through the Ontario COVID‑19 Child Benefit. Every eligible parent will receive $400 for each child aged 0 to Grade 12, and $500 for children and youth 21 years old or younger with special needs. Parents who had previously applied for and received the benefit do not need to apply again. Parents who had not applied for the previous payments will be able to submit an application for this third payment round.
The government postponed the property tax reassessment that was scheduled to be conducted in 2020 for the 2021 taxation year due to the pandemic. The government is implementing a further postponement of the property tax reassessment and will be seeking input from municipalities, taxpayers and interested stakeholders regarding the timing and valuation date for the next reassessment, which will be communicated in fall 2021.
Ontario is supportive of the federal government’s plan to consult on the modernization of Canada’s anti-avoidance rules, in particular the General Anti‑Avoidance Rule (GAAR). Ontario encourages the federal government to consider ways to combat artificial income shifting, such as through the use of trusts or corporate continuances, that put provincial tax revenue at risk.
Full details on the 2021 Ontario Budget can be found here.
This article has been written in general terms to provide broad guidance only. It should not be relied upon to cover specific situations and you should not act upon the information contained herein without obtaining specific professional advice. Please contact our office to discuss this information in the context of your specific circumstances. We accept no responsibility for any loss or damage resulting from your reliance on the information in this article.