Ontario restructures personal taxes

The Ontario budget has introduced a plan to restructure the province’s tax brackets and eliminate a surtax paid by filers.

The government says that in 2018, 8.6 million individuals wouldn’t be affected by the changes, but 1.8 million people would pay about $200 more on average. About 680,000 people would see a tax reduction of about $130 on average.

The budget says that under the proposed changes, a person earning $95,000 would no longer pay surtax, but would also pay $168 more in personal income tax in 2018.

Ontario will also enhance support for charitable giving by increasing the top rate of the non-refundable Ontario Charitable Donations Tax Credit. Currently, a rate of 5.05% applies to the first $200 of donations, while there’s a rate of 11.16% for donations that exceed that limit.

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Going forward, Ontario will not increase the rate for donations of $200 or less. It will, however, hike the OCDTC rate to 17.5% for all taxpayers for eligible donations exceeding $200.

The budget also enhances current corporate tax credits, including the Ontario Innovation Tax Credit and the Ontario Research and Development Tax Credit.

Ontario parallels income sprinkling measures

Following the federal government’s crackdown on income sprinkling, the Ontario government has proposed in its 2018 budget to “parallel those changes” once the feds’ amendments are approved.

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The provincial government plans to apply “its top [personal income tax] rate of 20.53% to split income received by an adult family member.”

The budget also proposes to follow “the federal measure on passive investment income,” which the federal budget provided more clarity on.

Read: Feds to tie passive income threshold to small business deduction

Currently, the budget says, “Ontario’s small business deduction reduces the Ontario general [corporate income tax] rate for small CCPCs and associated corporations, on up to $500,000 of qualifying active business income.” That limit, it adds, “is phased out on a straight-line basis for CCPCs (and associated corporations) that have between $10 million and $15 million of taxable capital employed in Canada.”

The federal government’s 2018 budget proposed “an additional phase out” of the small business limit, effective after the 2018 tax year, for corporations that earn between $50,000 and $150,000 of passive investment income in a year.

Ontario proposes to parallel the federal measure.