2019-2020 Ontario Budget Summary

Crowe BGK

The Minister of Finance Vic Fedeli, delivered the province’s 2019-2020 Budget speech on April 11, 2019. The following is a summary of the tax related highlights.

MEASURES AFFECTING INDIVIDUALS

A new refundable Childcare Access and Relief from Expenses (CARE) tax credit in respect of child care costs for Ontario families

The government proposes a new refundable Ontario Childcare Access and Relief from Expenses (CARE) Personal Income Tax credit, starting with the 2019 tax year.

A tax filer’s CARE tax credit amount would be the tax filer’s eligible child care expenses multiplied by the credit rate that is determined as shown in Table A.1. The table also shows examples of the credit rate at different family income levels.

A reduction and simplification of the Estate Administration Tax

To make life easier for families, Ontario is proposing to eliminate the Estate Administration Tax on the first $50,000 of the value of the estate. The Estate Administration Tax would continue to apply to the value of the estate exceeding $50,000 at the current rate. The tax would simply be calculated as:

$15 for every $1,000, or part thereof, of the value of the estate exceeding $50,000.

The proposed calculation of Estate Administration Tax would apply if an estate certificate is requested on January 1, 2020, or later.

The Low-income Individuals and Families Tax (LIFT) Credit

Effective January 1, 2019, the non-refundable Low-income Individuals and Families Tax (LIFT) Credit provides up to $850 in Ontario Personal Income Tax relief to low-income Ontario taxpayers who have employment income, including those earning minimum wage. This credit was announced in the 2018 Ontario Economic Outlook and Fiscal Review.

Ontario tax filers will be able to claim the LIFT Credit for 2019 when they file their 2019 tax return in 2020.

There is a two-step process to calculate the LIFT Credit.

Step 1: Determine the maximum LIFT Credit, which is the lesser of:

$850; and
5.05 per cent of employment income.

Step 2: Reduce the amount determined in Step 1 by 10 per cent of the greater of the tax filer’s:

Adjusted individual net income greater than $30,000; and
Adjusted family net income greater than $60,000.

The amount determined in Step 2 will then be limited to the taxpayer’s Ontario Personal Income Tax otherwise payable, excluding the Ontario Health Premium.

With this credit, a single person who works full-time at minimum wage (earning nearly $30,000) with no other income will receive $850 in Ontario tax relief and pay no Ontario Personal Income Tax. Those who earn more than $30,000 will receive less tax relief.

MEASURES AFFECTING BUSINESSES

Proposals to streamline cultural media tax credit administration, including a review of tax credit certification and changes to cut red tape for video game developers

Ontario offers a suite of five refundable cultural media tax credits that serve to increase production and create more jobs in the cultural media industries, including:

The Ontario Film and Television Tax Credit;
The Ontario Production Services Tax Credit;
The Ontario Computer Animation and Special Effects Tax Credit;
The Ontario Interactive Digital Media Tax Credit; and
The Ontario Book Publishing Tax Credit.

The cultural media tax credits are jointly administered by the Canada Revenue Agency and Ontario Creates. Ontario Creates is responsible for certifying company and product eligibility for Ontario’s cultural media tax credits.

The Ontario Interactive Digital Media Tax Credit is a refundable tax credit available to qualifying corporations for expenditures related to eligible interactive digital media products.

The credit has four streams for different types of products and companies. One of these streams is the specialized digital game corporation stream. Companies under this stream can apply for tax credit certification annually, rather than having to apply separately for each product they complete. Applying annually reduces paperwork and helps companies receive their tax credits faster, since they would no longer have to wait until a product is completed to claim the credit.

To qualify as a specialized digital game corporation, a company must spend at least $1 million in its taxation year on Ontario labour expenditures for eligible digital games. The Province is proposing to reduce this minimum Ontario labour expenditure from $1 million to $500,000. As a result, smaller video game developers will be able to apply for the tax credit annually as specialized digital game corporations, helping to streamline administration and reduce red tape. This proposal would be effective for taxation years commencing after April 11, 2019.

The Ontario Job Creation Investment Incentive to encourage businesses to invest in Ontario now and create jobs for the people of Ontario

Capital Cost Allowance

The government is strengthening Ontario’s tax competitiveness for business investment through the Ontario Job Creation Investment Incentive. This incentive parallels the immediate writeoff measures and the Accelerated Investment Incentive announced in the federal government’s Fall Economic Statement 2018. Under these measures:

Manufacturing and processing machinery and equipment and specified clean energy equipment can be immediately written off; and
Most other capital investments are eligible for an Accelerated Investment Incentive that provides a depreciation rate of up to three times the normal rate in the first year the asset is put into use.

These measures are in place for assets acquired after November 20, 2018, and will be phased out from 2024 to 2027.

Link: http://budget.ontario.ca/2019/annex.html

Prepared by:

Sergio DiMarco, CPA, CGA, D. Tax, is a Senior Tax Manager at Crowe BGK

Connect with him: [email protected]

Dany Turgeon, M. Fisc., is a Tax Specialist at Crowe BGK

Connect with him : [email protected]