Ontario Finance Minister Charles Sousa, right, delivers the Ontario 2016 budget next to Premier Kathleen Wynne, left, at Queen's Park in Toronto on Thursday, February 25, 2016. Photo: Nathan Denette/CP Ontario Finance Minister Charles Sousa, right, delivers the Ontario 2016 budget next to Premier Kathleen Wynne, left, at Queen's Park in Toronto on Thursday, February 25, 2016. Photo: Nathan Denette/CP

When Ontario’s Minister of Finance Charles Sousa wrapped up his budget speech last week, the owners of the province’s small- and medium-sized business likely let out sighs of relief.

Corporate income tax rates will remain the same for 2016, topping out at a combined 15%, with the combined tax on general income holding steady at 26.5%. Personal income tax rates were also untouched by Queen’s Park, in the wake of significant changes introduced by the federal government earlier this year.

Electricity costs will remain flat for industrial and commercial consumers, but any businesses that requires its employees to be out on the road will be squeezed a little more. To cover the cost of a new cap-and-trade system on carbon pricing being rolled out by the province, gas prices will jump by by 4.3 cents per litre. Larger emitters will be required to purchase allowances in the new carbon market if their emissions output exceeds annual allowances as supplied (free of charge) by the province.

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The first phase of the cap and trade system is scheduled for implementation January 1, 2017. The program applies to organizations “that emit 25,000 tonnes of GHG emissions per year or more, as well as suppliers and distributors of transportation fuels that distribute 200 litres of fuel per year or more,” along with organizations that import electricity and fuels into Ontario. Still, while the system could have a significant bottom-line impact on the province’s manufacturers and other heavy emitters, most SMEs won’t be affected.

Companies with employees on the road aren’t the only ones that can expect to see costs rise; employers that rely on specific tax credits will want to take note of a few unfavourable changes in this budget. The Ontario Research and Development Tax Credit, a 4.5% non-refundable credit, will be reduced to 3.5% of eligible expenditures on June 1, 2016. The Ontario Innovation Tax Credit also gets a haircut, dropping to 8% from 10%.

And while the Apprenticeship Training Tax Credit will remain unchanged, it may not stay that way—the budget confirmed that the program is currently under review. So too are Workplace Safety Insurance premiums, which are predicted to decrease starting in 2017.

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Some entrepreneurs will take a hit on their personal income taxes too. The budget eliminates the Ontario Tuition and Education Credits effective fall 2017, replacing the program with the new Ontario Student Grant benefitting families with incomes of $50,000 or less. The Children’s Activity Credit is also being eliminated, with that change taking effect on January 1, 2017. Tax on income split with minors—or the so-called ‘Kiddie Tax’—will now be taxed at Ontario’s top marginal rate of 20.53%, up from 13.16%, plus surtax for higher income earners.

While the Wynne government offered good news in the form of a brighter deficit projection of $5.7 billion for the 2015-16 fiscal year—$2.8 billion less than forecasted thanks in large part to the slumping loonie and improved exports—the budget offered little in the way of sunny (or even very significant) news for the province’s entrepreneurs.

Overall, this budget will have only a marginal impact on the majority of SME owners. With no increase (or decrease) in corporate tax rates, or the introduction of new levies, it’s likely to be remembered as one of the more inconsequential budgets in recent memory—at least from the perspective of Ontario’s business community.

If the Ontario provincial budget is a warm-up for the looming federal equivalent, due March 22, 2016, Finance Minister Bill Morneau’s speech will be greeted with more sighs of relief from Canada’s SME owners.

Armando Iannuzzi is a tax partner at Kestenberg Rabinowicz Partners LLP, a Markham, Ont.-based firm that provides strategic tax, accounting and finance services to entrepreneurs.


What are you hoping to see in the federal budget later this month? How will the changes and new programs in Ontario affect your business? Let us know by commenting below.

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