Last updated: Oct. 8, 2021
Last week Ontario Finance Minister Peter Bethlenfalvy presented the province’s fiscal 2021–22 budget.
The Ontario budget falls in line with what we’re seeing from other provincial budgets: more spending on health care, but otherwise a relatively quiet budget from a tax perspective.
We’re happy to report the personal tax rate and business tax rate in Ontario will stay the same. Read on for the highlights that may impact your small business.
Second round of the Ontario Small Business Support Grant
The government is offering a second round of Ontario Small Business Support Grant payments to eligible businesses hit hardest by the pandemic.
If your small business already received a grant payment through this program, you’ll automatically be entitled to a second payment in the same amount (between $10,000 to $20,000). You won’t need to apply again.
However, the deadline for the grant is March 31, 2021, which makes us question if the province will be extending the deadline for businesses that haven’t received support yet.
New Tourism and Hospitality Small Business Support Grant
The province is creating a Tourism and Hospitality Small Business Support Grant. They’ve earmarked $100 million in grants for eligible tourism and hospitality businesses. Businesses that qualify will receive one-time payments of $10,000 to $20,000.
The government hasn’t released any application details yet, but they announced that eligible businesses will include:
- Hotels
- Motels
- Travel Agencies
- Amusement and Water Parks
- Hunting and Fishing Camps
- Recreational and Vacation Camps (e.g., children’s overnight summer camps)
Note: If your business already received the initial small business grant, you won’t be eligible for the tourism benefit.
Regional Opportunities Investment Tax Credit
The province is proposing to temporarily double the regional opportunities investment tax credit rate, from 10% to 20%.
This refundable credit is available to Canadian-controlled private corporations that make qualifying investments in eligible geographic areas of Ontario. Corporations must invest more than $50,000 to qualify (and up to $500,000 a year).
To qualify for the tax credit, your investments must:
- Be used to acquire, construct or renovate an eligible property in a designated region
- Become available for use on or after March 25, 2020 and in the taxation year in which the tax credit is being claimed
Eligible properties are:
- Commercial or industrial buildings (or other structures) that are included in capital cost allowance classes 1 or 6 for income tax purposes
- Located in a designated region
Residential buildings are not eligible.
The maximum tax credit your corporation could receive in a year is $45,000 in respect of all qualifying investments. The tax credit is calculated on the total expenditures incurred by your corporation across all designated regions.
For example, a corporation with eligible expenditures of $200,000 would receive $15,000:
10% of ($200,000 – $50,000)
= 10% of $150,000
= $15,000
How to claim the credit
Corporations can claim the tax credit on their T2 Corporation Income Tax return once the CRA has developed the necessary tax form and updated its systems, which is anticipated to be in May 2021.
As mentioned above, there are no new taxes or tax increase. Below is a summary of personal and corporate tax measures in Ontario.
Personal tax measures
Personal income tax rates in Ontario
The budget does not include any changes to personal income tax rates. Ontario’s provincial personal income tax rates are set out below.
| 2020/2021 Ontario Personal Tax Rates | ||||
| Brackets | 2020 Tax Rate | Brackets | 2021 Tax Rates | |
| $0 to 44,740 | 5.05% | $0 to 45,142 | 5.05% | |
| $44,740 to 89,482 | 9.15% | $45,142 to 90,287 | 9.15% | |
| $89,482 to 150,000 | 11.16% | $90,287 to 150,000 | 11.16% | |
| $150,000 to 220,000 | 12.16% | $150,000 to 220,000 | 12.16% | |
| Over $220,000 | 13.16% | Over $220,000 | 13.16% | |
For taxable income in excess of $150,000, the 2021 combined federal–Ontario personal income tax rates are outlined below.
| Bracket | Ordinary income* | Eligible dividends | Non-eligible dividends |
| $150,001 to $151,978 | 47.97% | 27.53% | 37.90% |
| $151,978 to $216,511** | 48.29% | 32.11% | 41.72% |
| $216,511 to $220,000 | 51.97% | 37.19% | 45.95% |
| Above $220,000 | 53.53% | 39.34% | 47.74% |
* The rate on capital gains is one-half the ordinary income tax rate.
** The federal basic personal amount comprises two elements: the base amount ($12,421 for 2021) and an additional amount ($1,387 for 2021). The additional amount is reduced for individuals with net income in excess of $151,978 and is fully eliminated for individuals with net income in excess of $216,511. Consequently, the additional amount is clawed back on net income in excess of $151,978 until the additional tax credit of $208 is eliminated; this results in additional federal income tax (e.g., 0.32% on ordinary income) on net income between $151,979 and $216,511.
In addition, for 2021, a 20% surtax applies to basic Ontario tax in excess of $4,874, and an additional 36% surtax applies to basic Ontario tax in excess of $6,237.
Individuals’ resident in Ontario on 31 December 2021 with taxable income in excess of $20,000 must pay the Ontario Health Premium. The premium ranges from nil to $900 depending on the individual’s taxable income, with the top premium being payable by individuals with taxable income in excess of $200,600.
Individuals’ resident in Ontario on 31 December 2021 with taxable income up to $15,850 pay no provincial income tax as a result of a low-income tax reduction. The low-income tax reduction ($251 of Ontario tax) is clawed back for income in excess of $15,850 until the reduction is eliminated, resulting in an additional 5.05% of provincial tax on income between $15,851 and $20,821.
Personal tax credits for 2021
The maximum tax credit amounts and actual Ontario tax credits for 2020 and 2021 are set out below.
| Ontario Non-Refundable Tax Credits | |||||
| 2020 | 2021 | ||||
|
Maximum Amount |
Ontario
Tax Credit |
Maximum Amount |
Ontario
Tax Credit |
||
| Basic Personal Amount | $10,783 | 545 | $10,880 | 549 | |
| Spousal Amount | 9,156 | 462 | 9,238 | 467 | |
| Eligible dependent amount | 9,156 | 462 | 9,238 | 467 | |
| Age amount | 5,265 | 266 | 5,312 | 268 | |
| Ontario Caregiver Amount | 0 | 0 | 0 | 0 | |
| CPP Contributions | 2,898 | 146 | 3,166 | 160 | |
| EI Contributions | 856 | 43 | 890 | 45 | |
| Pension income amount | 1,491 | 75 | 1,504 | 76 | |
| Disability amount | 8,712 | 440 | 8,790 | 444 | |
| Disability supplement | 5,081 | 257 | 5,127 | 259 | |
| Tuition and education amounts | Variable | Variable | Variable | Variable | |
| Adoption expenses (max) | 13,156 | 664 | 13,274 | 670 | |
| Medical expenses | N/A | Variable | N/A | Variable | |
| Medical expenses (other dependents) | 13,156 | Variable | 13,274 | Variable | |
| Interest on student loans | Variable | Variable | Variable | Variable | |
| Donations & Gifts
-first $200 – over $200 |
200 75% of income |
10.10 Variable |
200 75% of income |
10.10 Variable |
|
| In general, credits are multiplied by 5.05% to arrive at the deduction from Ontario Tax. In the case of donations and gifts over $200, the credit is 17.50% | |||||
Ontario corporate tax rate
Ontario’s 2021 budget has not changed the small business tax rate in Ontario. The combined federal and Ontario corporate income tax rates will be as follows:
| 2021 | ||
| Ontario | Federal and Ontario Combined | |
| Small business rate *, ** | 3.20% | 12.20% |
| Manufacturing & Processing | 10.00% | 25.00% |
| General Corporate rate | 11.50% | 26.50% |
* On the first $500,000 of active business income. The small-business rate is prorated based on a 31 December year-end.
** Ontario reduced its small business rate from 3.50% to 3.20% effective 1 January 2020.
Contact FBC
Have questions about this or other COVID-19 programs for Canadian businesses? Unlimited consultation related to tax matters is a key benefit of FBC Membership. We’re offering a free consult where we get to know your business and determine next steps on saving you time and money. Book your appointment online.
You can also visit our COVID-19 Resource Centre for the latest information on Canadian small business grants and other resources that will support you and your business throughout this crisis.