Ontario Budget 2014

contributed by David Levine

The minority Liberal Government under Premier Kathleen Wynne released its second budget for 2014-2015. The budget was introduced by Finance Minister Charles Sousa at Queens Park on May 1. Here are some of the highlights of the Budget:

  • A new Ontario Retirement Pension Plan for employees that do not have a workplace pension. It will require contributions of 1.9% of salary (to a maximum of $90,000) by the employee and employer or 3.8% in total. This would commence in 2017.
  • A new tax rate of 12.16% on income between $150,000 and $220,000. The 13.16% tax rate for income’s greater than $514,000 will now apply to income greater than $220,000. Ontario will become the third highest tax rate among the provinces and territories for those in the “top” tax bracket. The combined Federal and Ontario tax rates will be as follows:
    • Income between $136,271 – $150,000 46.41%
    • Income between $150,000 – $220,000 47.97%
    • Income between $220,000 – $514,090 49.53%
    • Income greater than $514,090 – 49.53%
  • The Ontario portion of the Small Business deduction will be phased out for large Canadian Controlled Private Corporations with more than $10M in taxable capital employed in Canada. This measure would increase the Ontario tax rate from 4.5% to 11.5% on the first $500,000 of active business income.
  • The dividend tax credit in Ontario is subject to the surtax on high income taxpayers. Individuals subject to the surtax have an effective dividend tax credit rate of 7% on non-eligible dividends and 10% on eligible dividends, while non-surtax taxpayers have effective dividend tax credit rate of 4.5% on non-eligible dividends and 6.4% on eligible dividends. The budget is proposing to set the effective dividend tax credit rates for all taxpayer to 4.5% on non-eligible dividends and 10% on eligible dividends.
  • Ontario Child Benefit provided to low to moderate income families with children under age 18 to a maximum of $1,310, effective July 2014 from $1,210.
  • Ontario Energy and Property Tax Credits will be increase to $1.108 for seniors and $973 for non-seniors.
  • Tobacco tax to be increased from $24.70 per carton of cigarettes to $27.95 per carton.
  • Aviation Fuel tax to 3.7 cents per litre from 2.7 cents per litre.

On May 2, 2014 NDP leader Andrea Horwath withdrew her parties support for Wynne’s Liberal Minority Government and Premier Wynne requested the Ontario Lieutenant Governor to dissolve the legislature at Queens Park and call an election for June 12, 2014.

The Liberals are seeking re-election based on their budget. If re-elected and the budget is passed by Queens Park it is recommended that in order to keep income below $150,000 if possible taxpayers can try and split income from family businesses with other family members (except minors). Taxpayer are also reminded to pay into their RRSP’s up to their deduction limit in order to reduce their net income.

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