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2020 Ontario Fiscal and Economic Update – Funding Highlights

The Ford Government has released a one-year economic and fiscal update that has currently replaced the highly anticipated Ontario Budget for 2020-21. As of March 25th, 2020, the appropriately named one-year plan; “Ontario’s Action Plan: Responding to COVID-19” addresses a growing concern for Ontario’s economic stability and well-being. By June 7th, the government plans to release a long-range assessment, including anticipated changes in Ontario’s economy and by November 15th, the full budget will be released.

The government’s action plan is the first step in its response to COVID-19 and includes $7 billion in additional resources for the health care system and direct support for people and jobs. It will also make available $10 billion in support for people and businesses through tax and other deferrals to improve their cash flow, protecting jobs and household budgets.

COVID-19 Response – EHT Tax Relief

They will also be cutting taxes by $355 million for about 57,000 employers through a proposed temporary increase to the Employer Health Tax (EHT) exemption. Note that the EHT is payroll tax paid by employers based on their total annual Ontario remuneration, and has a top rate of 1.95%. The new EHT exemption change allows private‐sector employers with total annual Ontario remuneration of less than $5 million to be eligible up to $1 million for 2020 as the exemption will return to its original level of $490,000 on January 1st, 2020. This increase to $1 million in EHT exemption will provide an additional $9,945 per eligible employer therefore eligible employers could benefit by up to $19,500 in total EHT relief.

Regional Opportunities Investment Tax Credit

Additionally, the Ford Government will be helping companies within regions that are currently lagging in employment growth by introducing a new 10% refundable Corporate Income Tax Credit for capital investments, the Regional Opportunities Investment Tax Credit (ROITC). This means that Canadian‐controlled private corporations that make qualifying investments that become available for use on or after March 25, 2020, in specified regions of Ontario would be eligible for the tax credit. Qualifying investments of the ROITC would include expenditures for constructing, renovating or acquiring eligible commercial and industrial buildings and other assets. The tax credit would be available for expenditures above $50,000 and up to a limit of $500,000 for qualifying investments that become available for use by a Canadian‐controlled private corporation in the taxation year.  A total of $25 Million has budgeted for this tax credit.  We will publish more details on this new tax credit as the information becomes available.

COVID-19 Response – Economy

The Ontario government plans to support more affordable electricity bills for eligible residential, farm and small business consumers, by providing approximately $5.6 billion for electricity cost relief programs in 2020-21 (a $1.5B increase from 2019’s Budget). We will also be seeing investment in the Municipal Modernization Program to support 405 small and rural municipalities invest in service delivery reviews and projects aimed at increasing municipal efficiency, and funding for disaster relief assistance. Charitable and non-profit social service organizations will also be eligible for $148 million of new funding to improve their ability to respond to COVID-19. The June 30th quarterly municipal remittance of education property tax to school boards will be deferred by 90 days resulting in the government spending over $1.8 billion.

COVID-19 Response – Health

The budget plan includes historic levels of prudence, including a dedicated $1 billion COVID-19 contingency fund for emerging needs related to the outbreak, as part of the additional health care investments, as well as increased contingency fund of $1.3 billion to provide continued flexibility to respond to changing global circumstances. There will be $935 million invested into the hospital sector, addressing issues such as accelerating progress on the government’s commitment to addressing capacity issues, as well as additional beds and assessment centers. There will also be an increase of public health funding by $160 million to support COVID-19 monitoring, surveillance, and laboratory and home testing, while also investing in virtual care and Telehealth Ontario. Additionally, $243 million will be allocated towards the long-term care sector while $75 million is allocated for personal protective equipment and critical medical supplies for front-line staff to tackle COVID-19.

-The Fairtax Team

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