2023 Ontario Budget Highlights

Building a Strong Ontario

On Thursday, March 23, 2023, Ontario Premier Doug Ford and Minister of Finance Peter Bethlenfalvy released 2023 Ontario Budget: Building a Strong Ontario. The Ontario government’s $204.7-billion budget outlines the province’s plans to provide significant tax incentives to Ontario manufacturing businesses, and their goal of balancing the budget by 2025.

New Ontario Made Manufacturing Investment Tax Credit

The Ontario government is proposing a new Ontario Made Manufacturing Investment Tax Credit (“OMTC”). The OMTC will be a 10 per cent refundable corporate income tax credit available to Canadian-controlled private corporations (“CCPC”) that have a permanent establishment in Ontario that make eligible capital investments in buildings, machinery and equipment used in manufacturing or processing in Ontario.

The OMTC would be available for eligible capital costs incurred up to a limit of $20 million in a taxation year, resulting in a maximum annual credit available of up to $2 million. The OMTC will be a refundable tax credit, meaning it will be available to eligible CCPCs irrespective of whether the CCPC has taxes payable in the applicable taxation year.

The $20 million limit would be shared amongst an associated group of corporations and would be prorated for a short taxation year.

Eligible investments would be expenditures for certain capital property included in Class 1 or Class 53 for capital cost allowance (CCA) purposes:

Class 1: Eligible expenditures would include capital costs for constructing, renovating, or acquiring buildings used for manufacturing or processing in Ontario that become available for use* on or after March 23, 2023. To qualify as a building used for manufacturing, 90 per cent of the floor space of the building must be used at the end of the corporation’s taxation year for manufacturing or processing in Ontario and the building must be eligible for the additional six per cent CCA permitted under the Federal Income Tax Act.

Class 53: Eligible expenditures would include capital costs for machinery and equipment used in the manufacturing or processing of goods in Ontario. The machinery and equipment would have to be acquired and become available for use* on or after March 23, 2023, and before 2026. After 2025, eligible capital costs would include expenditures for machinery and equipment used in the manufacturing or processing of goods for sale or lease that are included in Class 43(a).

*“Available for use” refers to the rules set out in the Federal Income Tax Act that define the taxation year in which a taxpayer can start to claim CCA for a depreciable property.

Extension of the Small Business Deduction

As previously announced, the Ontario government plans to move forward with extending the small business deduction to larger CCPCs.

A CCPC has access to the small business deduction (“SBD”) on its first $500,000 of profits from an active business carried on in Canada. The $500,000 SBD must be shared among an associated group of companies. The SBD is currently clawed back where taxable capital employed in Canada (“Taxable Capital”) of the CCPC and its associated group of companies exceeds $10 million. Further, the SBD is fully eliminated where Taxable Capital reaches $15 million.

The Ontario government proposes to extend the range over which the SBD is reduced, with a revised range of $10 million to $50 million. This measure would mirror the Federal Budget 2022 announcement in respect of the federal SBD, which has since been legislated.

The proposed measure would apply to taxation years that begin on or after April 7, 2022, to be consistent with the federal measure.

Additonal Key Tax-Related Measures

Guaranteed Annual Income System Payments

Investment As previously announced, the Ontario government doubled the Guaranteed Annual Income System (“GAINS”) payment for low-income seniors for the calendar year 2023. The maximum payment for 2023 was increased to $166 per month for single seniors and $332 per month for couples.

The Ontario government is proposing to further expand the eligibility under the GAINS, starting in July 2024. Specific details have not yet been released, but the suggested plan would be to lower the rate at which the benefit is reduced in relation to annual private income earned, such that more seniors would be eligible for the program.

Gas and Fuel Tax

As previously announced, the temporary gas tax rate cut of 5.7-cents per liter and the fuel tax rate cut of 5.3-cents per liter is extended to December 31, 2023.

Ontario's Film and Television Tax Credits

The Ontario government also highlighted its continued commitment to modernizing these credits to reflect current industry practices.

To understand how these changes will impact your personal and business affairs, schedule a consultation with a Crowe Soberman Advisor.

This article has been prepared for the general information of our clients. Please note that this publication should not be considered a substitute for personalized advice related to your situation.

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