Thursday, March 26, 2009

2009 Ontario Budget Highlights

 

March 26, 2009

 

PST/GST Harmonization

Ontario will join the other provinces to harmonize their sales tax systems with the federal GST.  The new harmonized tax will be collected by CRA.  The combined tax rate will be 13% that will begin July 1, 2010. 

Small Business Transition Credit

To help reduce the compliance cost of the move to the new system for small businesses, a credit of between $300 and  $1,000 will be allowed for the first reporting period after the harmonization.

Rebates for Individuals

There will be rebates to individuals and families of between $300 and $1,000 dependant on the income filed on the 2009 and 2010 personal tax returns.  Individuals will receive a maximum benefit of $300 if income is less than $ 80,000 and families receive a maximum benefit of $1,000 if income is less than $ 160,000.

Personal Income Tax Rates Reduced

The lowest tax bracket will be reduced from 6.05% to 5.05% effective January 1, 2010.  Individuals subject to Ontario surtax will have an increase to their income tax, since the threshold for the 20% surtax will apply when tax is $3,978 vs. $ 4,257, and the tax threshold at 36% surtax will apply when tax is $5,091 vs. $ 5,370.

Dividend Tax Credit Reduced

Effective January 1, 2010 the dividend tax credit on eligible dividends will be reduced from 7.4% to 6.4%.  The credit on ineligible dividends will be reduced from 5.13% to 4.5%.

Tax-Free Savings Accounts

Beginning January 1, 2009 a new savings accounts has been introduced to Canadians.  The government will now allow beneficiary designations of TFSA’s outside of a will.  This will allow TFSA’s to pass to designated beneficiaries without being subject to probate tax that will help to ease estate matters and reduce costs.

Corporate Income Tax

The small business tax rate will be reduced July 1, 2010 to 4.5% on income less than       $500,000.  A surtax of 4.25% that is charged on income greater than $500,000 will be eliminated.  The rates will be prorated for taxation years that straddle the effective dates.

Corporate Minimum Tax

For corporations with total assets of less than $50 million or total revenue of less than