On March 27, 2003, Janet Ecker presented the first Ontario Budget ever delivered outside the legislature. She announced a balanced budget, the fifth in succession for the Ontario government. Those anticipating a plethora of potential "pre-election goodies" were likely disappointed, however most will find some satisfaction in the minor adjustments and changes that were proposed. The key areas of change are summarized below. Corporate Tax Measures Income Tax Rates There were no new corporate income tax rate reductions or changes announced in this budget. Previously announced rate reductions will proceed as planned, resulting in a general corporate tax rate of 8% by January 1, 2006 and a small business tax rate of 4% by January 1, 2005. Capital Tax The government announced a 10% reduction in the capital tax rate effective January 1, 2004. As a result, the capital tax rate will drop from .3% to .27% of a corporation's taxable capital in excess of the $5,000,000 exemption amount. The government also announced a plan for the eventual elimination of the capital tax. The timing for this change will coincide with the planned elimination of the federal capital tax (Large Corporations' Tax), which is to occur by 2008. Apprenticeship Tax Credit The government introduced a new refundable tax credit for both corporations and unincorporated businesses for wages paid to an apprentice in a qualifying skilled trade. This credit will apply to wages paid after March 27, 2003 and will be set at 15% for employers with payroll costs of $400,000 or less, reducing to 10% for employers with payroll costs in excess of $600,000. Employers will be eligible for a tax credit of up to $250 per month per apprentice to a maximum of $6,000 over a two year employment period. Tax Incentive for Self-Generated Electricity The government intends to provide an additional deduction for the cost of new assets used to self-generate electricity from alternative or renewable energy sources. In order to qualify, construction of electrical generation facilities must have commenced after November 25, 2002 and be completed no later than January 1, 2008. This deduction will be in addition to the regularly available write-off of such assets provided for by the capital cost allowance system. Administrative Matters In keeping with the government's intentions to get tough on delinquent tax filers, notices are scheduled to be sent to all corporations in default of filing their corporation tax returns by April 30, 2003. Failure to respond to the notice may result in the dissolution of the corporation and prosecution of its directors. Other Tax Credits Minor enhancements and certain administrative changes were made to the Ontario Film and Television Tax Credit, the Ontario Book Publishing Tax Credit and the Ontario Business Research Institute Tax Credit. Personal Income Tax Measures Income Tax Rates There are no personal income tax rate changes for 2003. However, previously announced reductions for 2004 will continue, combined with some additional proposals to change the surtax and the Ontario Tax Reduction. Commencing January 1, 2004, the Ontario rate of tax on income up to approximately $32,500 will decrease from the current 6.05% to 5.65%. The rate of tax on income between $32,500 and $65,000 will decrease from the current 9.15% to 8.85%. There are no proposed changes to the top marginal rate of income tax, which is currently 46.41% (combined Federal and Ontario). Ontario Surtax In 2004, the Ontario surtax will be removed for individuals with incomes not exceeding $67,000 (indexed for inflation). This budget proposes to further increase that threshold to $75,000, effective January 1, 2005. The maximum savings is about $150. Ontario Tax Reduction The Ontario Tax Reduction, which eliminates or reduces Ontario income tax for low-income individuals, will be increased from the current amount of $181 to $197 (to be adjusted for inflation), effective January 1, 2004. Individuals with income under $10,800 will pay no Ontario income tax in 2003. This will increase to approximately $11,300 in 2004. Tax Credits for People with Disabilities and Their Caregivers The Ontario government currently provides tax relief to residents with disabilities as well as to the people who care for them. This year's budget will increase these credits as follows:
In addition to the credit increases, the eligibility for the caregiver tax credit is being expanded to include spouses or common-law partners who are dependent by reason of mental or physical infirmity, as well as extending support to include more caregivers living apart from their dependent relatives. The budget also increased the income threshold at which the caregiver and the infirm dependant credit are totally eliminated. It is now proposed that these credits will not be eliminated until the dependant's income reaches the following levels:
Property Tax Relief for Seniors The budget proposes a new property tax credit for seniors who own or rent their homes. Starting in July 2003, this credit program will allow seniors to be reimbursed for the full amount of their residential education property tax beginning in 2004. It is estimated that the average net savings will be $475 per senior household.
The 2001 Budget introduced the EETC which provides a credit on the first $7,000 of eligible tuition fees per child paid to an independent school in Ontario. The first phase of the 5 year implementation plan started in 2002 at a rate of 10%. The 2002 budget delayed the implementation of further rate increases until 2004. Today's budget has proposed that the original implementation period of 5 years be restored. As a result, the tax credit rates will be as follows:
Other Matters Land Transfer Tax - Farmland Currently, farmland transferred into a family farm corporation is exempt from land transfer tax. This exemption is to be extended to transfers of qualifying farmland between family members after March 27, 2003. Retail Sales Tax The retail sales tax rebate for qualifying alternative fuel vehicles is being doubled, to a maximum of $2,000. Qualifying vehicles must be purchased after March 27, 2003. Also, the current retail sales tax rebate for solar energy systems will be expanded to include other eligible residential energy systems including wind energy systems and geothermal heating/cooling systems. Improvements will be made to the system for Purchase Exemption Certificates. Signatures will no longer be required and the certificates will not require renewal. Support for Ontario's Wine Strategy The Ontario government supports the Ontario wine industry through matching funds for marketing, advertisement and tourism initiatives. This program, "The Wines of Ontario - Building a World Class Brand", is due to expire December 31, 2004. Beginning in 2005, the Province will commit to similar matching marketing support of $2 million annually, for a five-year term. Many of these budget measures will impact your personal and business tax affairs. We invite your calls to discuss them with us, so that we may mutually explore how you can plan to use them to your maximum advantage. |