Ontario Budget 2019 Highlights
Ontario Minister of Finance presented the 2019 Ontario Budget, which projects a deficit of $10.3 billion for 2019-2020 and includes a plan to return to a balanced budget in 2023-2024. The budget announced several noteworthy changes which will provide tax relief to small estates, low-income workers, and families. A comprehensive overview of the budget’s tax measures can be found in the Ontario Budget Dispatch.
Ontario Childcare Access and Relief from Expenses (CARE) Tax Credit
Budget 2019 proposes a new refundable Ontario Childcare Access and Relief from Expenses (“CARE”), which is effective as of 2019. The credit is computed by multiplying a taxpayer’s eligible child care expenses (for the purposes of the child care expense deduction) by a credit rate. The credit rate is subject to a graduated phase-out based on the family’s income. The computation of the credit rate based on income is illustrated in the chart below:
|Family Income||Credit Rate|
|Greater than $20,000 and up to $40,000||75% minus 2% for every $2,500 of income above $20,000|
|Greater than $40,000 and up to $60,000||59% minus 2% for each $5,000 of income above $40,000|
|Greater than $60,000 and up to $150,000||51% minus 2% for each $3,600 above $60,000|
|Greater than $150,000||0%|
Taxpayers claiming the CARE credit will continue to have access to the child care expense deduction. However, eligible care child expenses for the purposes of the CARE credit are not the actual costs incurred, but are the amount that the taxpayer can claim under the federal deduction rules. For example, for a child under the age of 7, the $8,000 limit under the federal rules is eligible child care costs for the purposes of the CARE credit, even if the taxpayer incurs more than $8,000 in costs. See Chart A.1 in the budget documents for a detailed example that illustrates this concept.
For 2019 and 2020, the CARE credit will be claimed on the tax return. However, for 2021 and later years, the budget proposes to allow taxpayers to apply for regular advance payments of the refundable credit throughout the year.
Low Income Individuals and Families (LIFT) Tax Credit
As previously-announced in the 2018 Ontario Economic Statement, the non-refundable LIFT credit is effective for 2019 and later years. The amount of the credit is equal to the lesser of $850 and 5.05% of employment income. The credit is phased-out by 10% of the taxpayer’s:
- adjusted individual income greater than $30,000; and
- adjusted family income greater than $60,000.
Where adjusted individual income exceeds $38,500, or adjusted family income exceeds $68,500, the credit is completely phased-out. Also, the taxpayer must be resident in Canada at the end of the year to be eligible for the credit.
Probate Relief for Small Estates
Estate administration tax is levied on the value of a deceased’s estate when an estate certificate (“letters probate”) is applied for. Currently, there is no estate administration tax payable when the value of the estate is $1,000 or less. For all other estates, the tax is applied at the following rates:
- $5 for every $1,000, or part thereof, of the first $50,000 of the value of the estate; and
- $15 for every $1,000, or part thereof, of the value of the estate exceeding $50,000.
The Ontario government is proposing eliminating estate administration tax on the first $50,000 of the value of an estate. Estate Administration Tax would continue to apply to the value of an estate exceeding $50,000 at the current 1.5% rate.
This proposal is effective for estate certificates requested on or after January 1, 2020.
The government also announced that it is planning on extending the deadlines for filing estate administration tax information returns from 90 days to 180 days after an estate certificate is issued. Where an amended information return is required (such as where it becomes apparent that earlier valuations provided on an information return were not correct), the deadline for filing an amended information returns will be extended from 30 days to 60 days.
The government proposes that these changes will also take effect January 1, 2020.