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Ontario 2009 Budget - March 26, 2009

Information on taxation changes was included in Chapter III: Reforming Ontario's Tax and Pension Systems on the Ontario Budget 2009 website.

See Ontario Budgets: past editions for more information on the 2009 Budget.

Bill 162, Budget Measures Act, 2009 received Royal Assent on June 5, 2009. It does not contain every income tax change from the 2009 Budget.

Bill 218, Ontario Tax Plan for More Jobs and Growth Act, 2009 received Royal Assent on December 9, 2009. It includes, among other things:

	Lowest tax rate reduction to 5.05% for years after 2009
	Surtax threshold changes, which differ from those presented in the budget - see below
	Dividend tax credit changes
	Corporate tax rate reductions
	Changes to the Retail Sales Tax Act regarding the implementation of the HST

See news release Ontario's Plan for Jobs and Growth.

Personal income tax changes

Tax rates

Lowest tax rate to be reduced from 6.05% (2009) to 5.05% for 2010

Surtaxes are calculated on basic Ontario Tax greater than certain thresholds. The thresholds are to be reduced for 2010:

	20% threshold reduced from $4,257 to $3,978 *($4,006 in Bill 218)*
	36% threshold reduced from $5,370 to $5,091($5,127 in Bill 218)

Sales and property tax credit

The current combined sales and property tax credit would be replaced with 2 new credits:

Ontario Sales Tax Credit:

	tax relief of up to $260 for each adult and child in low-and middle-income families
	reduced by 4% of adjusted family net income over $20,000 for single people, and over $25,000 for families
	refundable and paid quarterly, starting July 2010

Ontario Property Tax Credit

	based on occupancy cost - property tax paid, or 20% of rent paid
	credit of up to $250 for non-seniors or $625 for seniors, plus 10% of occupancy cost
	credit would not exceed occupancy cost, and would be subject to a maximum of $900 for non-seniors and $1,025 for seniors
	adjusted by 2% of adjusted family net income over $20,000 for single people and over $25,000 for families
	refundable, and claimed on the personal income tax return, beginning with the 2010 return.

Dividend tax credit

As a result of the reductions in corporate income tax rates (see below), Ontario would adjust the dividend tax credit rates for 2010 and later years, as per the following table, which shows the dividend tax credit as a percentage of the taxable dividend:

	Current		Proposed
	2009	2010	2010
Eligible dividends	7.4%	7.7%	6.4%
Non-eligible dividends	5.13%	5.13%	4.5%

Locked-in Retirement Accounts

The Budget proposes the following reforms for locked-in retirement accounts:

	providing a 2-year waiver of fees for financial-hardship unlocking applications
	increasing the amount of unlocking permitted from Ontario Life Income Funds (LIFs) from 25% to 50%, on purchase from new LIFs, effective January 1, 2010
	Current new LIF owners would have an opportunity to unlock an additional 25% of amounts previously transferred in to their existing fund.
	Remaining old LIFs and Locked-in Retirement Income Funds (LRIFs) would be harmonized with the updated new LIF rules.

Tax-Free Savings Accounts (TFSAs)

The government proposes to change the Succession Law Reform Act (SLRA) to allow for beneficiary designation of TFSAs. This would allow TFSAs to be passed to designated beneficiaries outside of a will, without being subject to Estate Administration Tax.

Retail Sales Tax (RST) to be Harmonized with GST

See our Ontario HST page.

Corporate Tax Reductions

general corporate tax rate, which is currently 14%, would be reduced to:

	12% effective July 1, 2010
	11.5% effective July 1, 2011
	11% effective July 1, 2012
	10% effective July 1, 2013

manufacturing and processing to be reduced from the current 12% to 10% effective July 1, 2010

small business rate to be reduced from the current 5.5% to 4.5% effective July 1, 2010

small business deduction surtax of 4.25% to be eliminated effective July 1, 2010

exempt more small and medium-sized business from the Corporate Minimum Tax (CMT) and cut the CMT rate from 4% to 2.7%

Revised: September 20, 2024