Ontario Government Small Business Incentives – Tax Rate Reductions and More

Ontario Government Small Business Incentives – Tax Rate Reductions and MoreThe Ontario government provided an “economic update” on November 14, 2017 and, as part of the update, provided a number of tax relief measures for small businesses.

Tax Rate Changes

The small business corporate tax rate (applicable to the first $500,000 of active business income) will be reduced from the current 4.5% to 3.5% effective January 1, 2018. You may recall that the federal government, as part of its economic update on October 24, 2017, also announced small business tax rate reductions from the current 10.5% to 10% on January 1, 2018 and to 9% on January 1, 2019. As such, the combined federal/Ontario small business tax rates will be:

Current – 15%; 2018 – 13.5%; 2019 – 12.5%

As a result of the declining corporate tax rate, the personal tax rate on non-eligible dividends (being dividends paid out of corporate income that has been subject to the small business tax rates) will increase. The combined federal/Ontario tax rate on non-eligible dividends in the highest tax bracket will be:

Current – 45.30%; 2018 – 46.84%; 2019 – 47.78%

This indicates an incentive to consider the payment of non-eligible dividends in 2017 before the tax rate increases take effect (Not to mention the pending new rules on dividend sprinkling which will restrict dividend payments to certain shareholders post-2017 – click here to see our previous blog on that topic)

Graduated Apprenticeship Grant for Employers

The Ontario government is proposing to transform the existing Apprenticeship Training Tax Credit (ATTC) into a new Graduated Apprenticeship Grant for Employers (GAGE). Effective for apprenticeship registrations after November 14, 2017 the GAGE will be directed towards the completion of the training program by providing the following grants to the employer:

  • $2,500 upon the apprentice’s completion of level one and again at level two;
  • $3,500 upon the apprentice’s completion of level three and again at level four; and
  • $4,700 upon the apprentice’s attainment of certification (either through a certificate of apprenticeship or certificate of qualification, if applicable).

In addition there will be a $500 bonus added to each level where the apprentice belongs to “an underrepresented group” – being women, Indigenous peoples, Francophones, people with disabilities, newcomers, and visible minorities.

Youth Employment in Small Businesses

Presumably in an attempt to curtail the expected decline in youth employment due to the pending increases in the minimum wage (from the current $11.60/hr to $14.00/hr on January 1, 2018 and to $15.00/hr on January 1, 2019), the Ontario government, through the Ontario Employment Service program, will provide a new $1,000 grant to “small” (fewer than 100 employees) employers for hiring a worker aged 15 to 29 years old. The employer would receive an additional $1,000 for retaining that worker for six months. Further, for workers that are hired through the Ontario Youth Job Connection program the Ontario government will provide employers with retention payments of $1,000 after three months, with a further $1,000 payable after six months for each worker.

It seems that the Ontario government is attempting to support small businesses in light of the recent bad press that both the federal and Ontario governments have been receiving, but is it enough?