March 28, the Ontario Minister of Finance, Charles Sousa, tabled his government's 2018-2019 budget. This budget proposes to simplify Ontario's Personal Income Tax by eliminating the surtax and replacing it with new rates and brackets.
Changes to Personal Income Tax
The budget proposes to simplify the Personal Income Tax beginning in 2018 by eliminating the surtax and replacing it with new rates and brackets:
|Taxable income ($)||Proposed rates (%)|
|0 to 42,960||5.05|
|42,960 to 71,500||9.15|
|71,500 to 82,000||11.00|
|82,000 to 92,000||13.5|
|92,000 to 150,000||17.5|
|150,000 to 220,000||19.00|
|220,000 or more||20.53|
Tax relief from non-refundable tax credits will no longer be affected by the surtax.
Withholdings will be modified starting July 1, 2018 to take these changes into account.
Measures designed to limit income splitting
The budget proposes to harmonize with the measures announced by the federal government, designed to widen the application of the rules regarding tax on split income (kiddie tax) to certain private company revenue, and to extend its application to individuals 18 and older. These measures will come into effect on the same dates as those of the federal tax, i.e. starting in 2018.
The measures announced provide that family members of the business owner who fall into one or more of the following categories are not subject to the rules regarding income splitting:
- individuals 18 and older who have made a significant labour contribution to the business during the current year or the previous five years;
- individuals 25 and older who hold at least 10% of the voting shares of a company that derives less than 90% of its revenue from service delivery, and is not a professional corporation;
- the spouse of the business owner who is 65 or older and has made a significant contribution to the business;
- the individuals who derive capital gains from eligible shares of a small business or from agricultural or fishery assets, if they are not subject to the highest marginal tax rate on said gains.
Introduction of an Ontario drug and dental care program
The budget proposes a new drug and dental program for Ontarians who do not have coverage from an extended health plan, starting in the summer of 2019. Participants in this program would be reimbursed up to 80% of eligible prescription drug and dental expenses, up to an annual maximum of $400 for singles, $600 for couples, and $50 for each child in a family.
Expansion of Ohip+
As of August 2019, Ohip+ will be expanded to seniors, eliminating the annual deductible and co-payment for seniors under the Ontario Drug Benefit (ODB) program, saving the average senior approximately $240 annually. Seniors' prescription medications funded through the ODB program will be free of charge, regardless of income.
Free child care
To advance the goal of universal accessibility, the budget proposes to implement free licensed child care for preschool-aged children from the age of two-and-a-half until they are eligible for kindergarten, beginning in September 2020.
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This document is intended only to provide information of a general nature, which should not be considered to be tax advice. While reasonable steps have been taken to ensure that its content is accurate, Desjardins makes no guarantee in this regard.