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Canada | Ontario budget 2024-25 includes measures affecting businesses and individuals
- The Ontario budget for 2024/2025 has been tabled.
- The budget contains tax measures affecting corporations and individuals but contains no new taxes and no tax increases.
- This Alert summarizes the key tax measures.
On 26 March 2024, Ontario Finance Minister Peter Bethlenfalvy (Minister) tabled the province's fiscal 2024-25 budget. The budget contains some tax measures but contains no new taxes and no tax increases.
The Minister anticipates a deficit of CA$9.8b for 2024-25 and projects a deficit of CA$4.6b for 2025-26 before returning to a surplus position in 2026-27.
A brief summary of the key tax measures follows.
Business tax measures
Corporate income tax rates
No changes are proposed to the corporate tax rates or the CA$500,000 small-business limit.
Ontario's 2024 corporate income tax rates are summarized in Table A.
Table A — 2024 Ontario (ON) corporate income tax rates1
|
ON |
Federal and ON combined |
|
|---|---|---|
|
Small-business tax rate2 |
3.20% |
12.20% |
|
General manufacturing and processing tax rate2 |
10.00% |
25.00% |
|
eneral corporate tax rate2,3 |
11.50% |
26.50% |
1 The rates represent calendar-year-end rates unless otherwise indicated. 2 The federal corporate income tax rates for manufacturers of qualifying zero-emission technology are reduced to 7.5% for eligible income otherwise subject to the 15% federal general corporate income tax rate or 4.5% for eligible income otherwise subject to the 9% federal small-business corporate income tax rate. These reductions are not reflected in the combined federal and Ontario rates above. 3 An additional federal tax applies to banks and life insurers at a rate of 1.5% on taxable income (subject to a CA$100m exemption to be shared by group members). |
Other business tax measures
The Minister proposed the following business tax measures:
- Ontario computer animation and special effects tax credit (OCASE) — The budget is proposing to change the eligibility requirements for this 18% refundable corporate income tax credit. Currently, in addition to undertaking computer animation and special effects activities, a film or television production in Ontario must also be certified for either the Ontario film and television tax credit (OFTTC) or the Ontario production services tax credit (OPSTC) to be eligible for the OCASE credit.
Effective for productions for which computer animation and/or special effects work begins on or after 26 March 2024, a qualifying corporation will no longer be required to also qualify for either the OFTTC or the OPSTC. Instead, it will be required to incur a minimum of CA$25,000 in Ontario labor expenditures for each film or television production for which the OCASE credit is claimed. The minimum labor expenditure threshold must be incurred either in the tax year of the claim or cumulatively between the tax year of the claim and the previous tax year. Once a qualifying corporation incurs the minimum labor expenditure threshold within up to two tax years for a specific production, expenditures related to that production in those tax years and any subsequent tax years would be eligible.
Certain types of productions will be excluded from eligibility, including, for example, instructional, music and gaming videos.
- Ontario film and television tax credit - The government also confirmed, in keeping with its 2022 budget commitment, that it will review the OFTTC regional bonus to ensure it effectively supports film and television production across the province.
Personal tax
Personal income tax rates
The budget does not include any changes to personal income tax rates.
The 2024 Ontario personal income tax rates are summarized in Table B.
Table B — 2024 Ontario personal income tax rates1,2
|
First bracket rate3 |
Second bracket rate |
Third bracket rate |
Fourth bracket rate |
Fifth bracket rate |
|---|---|---|---|---|
|
CA$0 to CA$51,446 |
CA$51,447 to CA$102,894 |
CA$102,895 to CA$150,000 |
CA$150,001 to CA$220,000 |
Above CA$220,000 |
|
5.05% |
9.15% |
11.16% |
12.16% |
13.16% |
1 In addition, for 2024, a 20% surtax applies to basic Ontario tax exceeding CA$5,554, and an additional 36% surtax applies to basic Ontario tax exceeding CA$7,108.
2 Individuals resident in Ontario on 31 December 2024 with a combined taxable and split income exceeding CA$20,000 must pay the Ontario Health Premium. The premium ranges from CA$0 to CA$900 depending on the individual's taxable income, with the top premium being payable by individuals with a combined taxable and split income exceeding CA$200,599.
3 Individuals resident in Ontario on 31 December 2024 with taxable income up to CA$18,062 pay no provincial income tax as a result of a low-income tax reduction. The low-income tax reduction (CA$286 of Ontario tax) is clawed back for income exceeding CA$18,062 until the reduction is eliminated, resulting in an additional 5.05% of provincial tax on income between CA$18,063 and CA$23,726.
For taxable income exceeding CA$173,205, the 2024 combined federal-Ontario personal income tax rates are outlined in Table C.
Table C — Combined 2024 federal and Ontario personal income tax rates
|
Bracket |
Ordinary income1 |
Eligible dividends |
Non-eligible dividends |
|---|---|---|---|
|
CA$173,206 to CA$220,0002 |
48.29% |
32.11% |
41.71% |
|
CA$220,001 to CA$246,7522 |
49.85% |
34.26% |
43.50% |
|
Above CA$246,752 |
53.53% |
39.34% |
47.74% |
1 The rate on capital gains is one-half the ordinary income tax rate. 2 The federal basic personal amount comprises two elements: the base amount (CA$14,156 for 2024) and an additional amount (CA$1,549 for 2024). The additional amount is reduced for individuals with net income exceeding CA$173,205 and is fully eliminated for individuals with net income exceeding CA$246,752. Consequently, the additional amount is clawed back on net income exceeding CA$173,205 until the additional tax credit of CA$232 is eliminated; this results in additional federal income tax (e.g., 0.32% on ordinary income) on net income between CA$173,206 and CA$246,752. |
Other tax measures
Gasoline and fuel tax
As previously announced, the budget extends the current reduced gasoline and fuel tax rates by an additional six months to 31 December 2024. Since 1 July 2022, Ontario has reduced the gasoline tax rate from 14.7¢ per liter to 9.0¢ per liter and the clear fuel (diesel) tax rate from 14.3¢ per liter to 9.0¢ per liter. The reduced gasoline and fuel tax rates were previously scheduled to end after 30 June 2024.
Nonresident speculation tax/municipal vacant home tax
Ontario will take steps to strengthen the nonresident speculation tax with amendments to support compliance and improve fairness. The provincial government is also taking steps to increase information sharing among all levels of government to promote a greater understanding of home vacancy, foreign purchasing and ownership patterns.
As well, Ontario will make more vacant homes available for housing by empowering more municipalities to impose municipal vacant home taxes. The province will provide a new provincial policy framework, available to all single- and upper-tier municipalities, setting out parameters for implementing a vacant home tax. The framework will encourage municipalities to set a higher tax rate for foreign-owned vacant homes.
Beer, wine and spirits tax
Effective 1 April 2024, Ontario is eliminating the basic tax applicable to purchases of Ontario wine or Ontario wine coolers from winery retail stores. Currently, the tax is 6.1% of the retail price of the wine or wine cooler.
Ontario will also review taxes and fees on beer, wine and spirits with the goal of promoting a more competitive marketplace for Ontario-based producers and consumers.
Property tax
To encourage the development of purpose-built rental properties, Ontario is allowing municipalities to offer reduced municipal property tax rates on new multi-residential rental properties, effective immediately.
Ontario also is reviewing the property assessment and taxation system with a focus on fairness, affordability, business competitiveness and modernized administration tools. Ontario will continue to defer the provincewide property reassessment until it completes this review.
Tobacco tax
Ontario is proposing to move the monthly filing deadline for tobacco tax registrants from the tenth to the twenty-eighth day of each month, providing registrants with more time to file and aligning with other tax filing deadlines. This measure will take effect in July 2024.
To address the issue of contraband tobacco, Ontario is proposing amendments to the Tobacco Tax Act that would strengthen fines and provide the Ministry of Finance with additional enforcement tools. As well, the Ministry of Finance and the Ministry of Health are engaging in an initiative to cross-designate inspectors to seize certain tobacco products in contravention of the Tobacco Tax Act and the Smoke-Free Ontario Act, 2017.
Other measures
Review of Ontario's tax system
Ontario is continuing its review of the province's tax system, since first announcing its commitment to do so in the 2023-24 budget. The government consulted with tax experts, economists and business leaders, and based on those consultations, the tax review will focus on supporting greater productivity (including with respect to innovation and research), promoting fairness, enhancing simplicity and transparency, and modernizing administration tools.
Other reviews
Ontario also announced that it will review the tax relief measures that were extended in 2022 for the electricity distribution sector, before they expire on 31 December 2024.
For up-to-date information on the federal, provincial and territorial budgets, visit ey.com/ca/Budget.
For additional information concerning this Alert, please contact:
Ernst & Young LLP (Canada), Ontario
- Elena Doucette, Toronto
- Darrell Bontes, Ottawa
- Heather Wright, London
- Tim Rollins, Waterloo
- Ameer Abdulla, Waterloo
For a full listing of contacts and email addresses, please click on the Tax News Update: Global Edition (GTNU) version of this Alert.