March 2009
Government of Ontario Budget Highlights – 2009

The government of Ontario’s tabled its budget on March 26, 2009, revealing measures to stimulate the economy and help families weather the current economic storm. The Ministry of Finance projects that Ontario’s economy will decline by 2.5% in 2009. However, it expects growth to resume in the second half of 2009 and strengthen over the next two years.

The budget includes plans for $34 billion in investment spending over the next two years to help create jobs and boost economic growth over time.

BUDGET HIGHLIGHTS

Support for Seniors & Families

• Doubling the Senior Homeowners’ Property Tax Grant, as announced in the 2008 Ontario Budget, so that low- and middle income seniors living in their own homes will get $500 in support for their property taxes, which will help more than 600,000 seniors over the next five years.
• Increasing Access to Locked-In Accounts

The Budget also proposes reforms for locked-in accounts to give seniors and other Ontarians more flexibility in accessing the funds in these accounts:

– increasing the amount of unlocking permitted from Ontario Life Income Funds (LIFs) from 25 to 50 per cent; and
– providing a two-year waiver of fees for financial-hardship unlocking applications.
• Tax-Free Savings Accounts and the Succession Law Reform Act

– The government proposes to change the Succession Law Reform Act (SLRA) to allow for beneficiary designation of Tax-Free Savings Accounts (TFSAs). Designated beneficiaries would be able to receive TFSAs outside of a will in the same way that beneficiaries can receive proceeds of RRSPs. The TFSA could also pass to the designated beneficiary without being subject to Estate Administration Tax, simplifying estate matters and reducing costs.

Comprehensive Tax Reform Package

• Subject to approval by the legislature, the Ontario Government has proposed a plan to harmonize the sales tax system and move to a single value-added sales tax on July 1, 2010. This means combining the current GST (5%) and PST (8%). The combined sales tax will be 13% on July 1, 2010.
• The combined sales tax will not be charged on a range of services such as:

– basic groceries,
– prescription drugs, and
– medical devices.
• However, it will be levied on most other goods and services. This includes a single sales tax on items such as:

– gasoline,
– coffee,
– tobacco,
– hairstyling,
– gym membership,
– taxi fares,
– internet fees,
– golf fees,
– vitamins, and
– professional services such as legal, accounting and architects fees.
• To help people and families adjust to the new single sales tax, the government would provide permanent tax relief and direct payments:

– 93 per cent of Ontario taxpayers would pay less personal income tax
– Eligible families with an income below $160,000 would receive three payments from the provincial government, totalling $1,000
– Eligible individuals with an income of less than $80,000 would receive three payments totalling $300
– The first payment would arrive in June 2010, the second in December 2010 and the third in June 2011
• The provincial government would also provide:

– Permanent tax relief for people with low and middle incomes through one of the most generous refundable sales tax credits in Canada. This new credit would provide up to $260 per year for each adult and child
– A 16.5 per cent cut in the tax rate on the first $36,848 of taxable income earned by all Ontarians.



Ontario Dividend Tax Credit

• The dividend tax credit provides Personal Income Tax (PIT) relief to Ontario investors and small business owners in recognition that dividends from Canadian corporations are distributed from earnings that have already been taxed at the corporate level. As a result of the proposed reductions in Corporate Income Tax (CIT) rates, Ontario would adjust the tax credit rates for dividends from taxable Canadian corporations. The changes to the dividend tax credit rates would maintain the integration of Ontario’s CIT and PIT systems by reflecting the reduction in CIT rates.