Canada: Ontario Budget - 2014 Tax Highlights

Last Updated: May 2 2014
Article by Crowe Soberman LLP


On May 1, 2014, Ontario Finance Minister Charles Sousa tabled the province's 2014 Budget. This year's budget proposes additional personal income taxes on income over $150,000, a new pension plan and the phase out/elimination of the Small Business Deduction for larger Canadian-controlled private corporations.

Ontario's deficit for 2013-14 is estimated to be $11.3 billion, a $0.4 billion improvement compared with the 2013 Budget forecast. The government is projecting budget deficits of $12.5 billion for the 2014-15 year, $8.9 bllion for the 2015-16 year, $5.3 billion for the 2016-17 year and a return to a balanced budget by 2017-18.

The million-dollar question – will this budget pass, or are we headed into a provincial election?

Here we summarize the major tax measures announced in today's budget.


Personal income tax rate changes

  • The budget proposes to lower:
    • The taxable income threshold for the 13.16 per cent tax rate from $514,090 to $220,000; and
    • Add a new tax rate of 12.16 per cent on taxable income between $150,000 and $220,000.
  • These new income thresholds would not be adjusted for inflation each year, unlike the current taxable income thresholds.
  • The donation credit would continue to be computed as 5.05 per cent on the first $200 of donations each year, and 11.16 per cent on donations over that amount.
  • These changes would apply to taxation years ending after December 31, 2013.

As a result, Ontario's combined top personal marginal tax rates for 2014 are as follows:

There are no changes to the top marginal tax rates for 2014, which remain as follows:

As a result of these proposed changes, individuals who earn interest and regular income of $514,090 or more will pay an additional $10,268 in Ontario tax annually.

Tax credit for farmers who donate to community food programs

The Ontario government will bring forward legislation to implement a 25 per cent credit applicable to farmers who donate food to community food programs, including food banks. The credit will be computed on the value of the agricultural goods donated and can be claimed for donations made beginning January 1, 2014.


Proposed Ontario Retirement Pension Plan (ORPP)

Given the federal government's decision to shut down discussions on an enhancement to the Canada Pension Plan (CPP), Ontario is proposing to move forward with a new mandatory provincial pension plan – the Ontario Retirement Pension Plan (ORPP).

The ORPP would build on the key features of the CPP, and could later be integrated with the CPP should negotiations on an enhancement with the federal government be successful in the future.

  • Key design features would include:
    • Pool longevity and investment risk, as well as index benefits to inflation, similar to the CPP's retirement benefit.
    • Require equal contributions to be shared between employers and employees, not exceeding 1.9 per cent each (3.8 per cent combined) on earnings up to a maximum annual threshold of $90,000. The ORPP maximum earnings threshold would increase each year, consistent with increases to the CPP maximum earnings threshold.
    • Aim to replace 15 per cent of an individual's earnings, up to a maximum annual earnings threshold of $90,000.

Other features of the ORPP include:

  • The ORPP would be publicly administered at arm's length from the provincial government.
  • Benefits would be earned as contributions are made.
  • Individuals already participating in a comparable workplace pension plan would not be required to enroll in the ORPP.
  • Earnings below a certain threshold would be exempt from contributions, similar to the CPP. The government will consult on whether the ORPP's lower-income threshold would mirror that of the CPP.
  • The ORPP would be introduced in 2017.
  • The government will consult with Ontario employers and labour. Further technical details will be released later this year prior to introducing legislation.

Pooled Registered Pension Plans (PRPPs)

Pooled Registered Pension Plans (PRPPs) are a new form of tax-assisted individual retirement savings plans. They are intended to make it easier to save for retirement by offering employees and the self-employed an additional low-cost savings vehicle.

PRPPs are professionally managed, portable from one workplace to another, and have a more favourable tax treatment than group RRSPs.

  • Key design features would include:
    • Voluntary participation and contributions by employers
    • Automatic enrolment of employees. Where an employer elects to offer a PRPP, an employee would be automatically enrolled unless he/she chooses to opt out within a specified period.
    • Low cost – administrators would be required to provide PRPPs at a low cost to plan members.

The government intends to introduce PRPP legislation in the fall of 2014.


Ontario Small Business Deduction (SBD)

  • The Ontario Small business deduction (SBD) is intended to provide tax relief to Canadian-controlled private corporations (CCPCs) in Ontario. The current SBD threshold is $500,000 at which a favourable Ontario tax rate applies (i.e., 4.5 per cent).
  • Currently, all CCPCs, small or large, are eligible for the Ontario SBD. The budget proposes to ensure only small CCPCs can qualify for the deduction, which would be consistent with other provinces and the federal government.
  • The budget proposes to phase out the SBD for large CCPCs (and associated groups of CCPCs) with more than $10 million in taxable capital employed in Canada in the previous year and would be fully eliminated for large CCPCs (and associated groups of CCPCs) with taxable capital in the previous year of more than $15 million.
  • The change could cost a CCPC with more than $15 million of taxable capital up to $35,000 of additional tax per annum.
  • The proposed change would apply to CCPC taxation years ending after May 1, 2014 (pro-rated for taxation years that straddle May 1, 2014.

*On first $500,000 of active business income, subject to the phase-out discussed below.

Corporate tax avoidance

  • The budget indicates that Ontario supports the various initiatives undertaken by the federal government, including those in the 2014 federal budget, to address aggressive international tax planning.
  • To this end, Ontario will introduce legislative amendments that would require corporations in Ontario to disclose aggressive tax avoidance transactions to the federal Minister of National Revenue, who administers Ontario's corporate taxes.

Underground economy

  • Through the Tender Contract Tax Compliance initiative launched in February 2014, businesses that are engaged in procurement activity with the Ontario government must demonstrate (via certification of tax compliance) that they are compliant with their provincial tax obligation prior to being awarded government contracts.

Research and Development (R&D) Incentives

  • As noted in the 2013 Ontario Economic Outlook and Fiscal Review, the government is reviewing options to restructure tax support for research and development (R&D), including an incentive for incremental R&D, with the goal of increasing R&D investment in Ontario.
  • The government will explore the following approach:
    • Companies that increase R&D investment would qualify for an enhanced tax credit on incremental investment in addition to their existing credits;
    • Companies that maintain consistent R&D investment would receive the existing level of tax support; and
    • Companies that significantly decrease R&D investment would have existing provincial tax credit rates reduced.
  • The government will consult with businesses and research organizations on this approach.

Training tax incentives

  • Ontario provides refundable tax credits, namely the Apprenticeship Training Tax Credit (ATTC) and Co-operative Education Tax Credit (CETC), to businesses on the salaries and wages paid to Ontario apprentices and co-op students.
  • These credits are refundable so businesses can receive tax support even if no income tax is payable in the year.
  • The government will review training tax credits with the intention of limiting these tax credits by making them non-refundable for large businesses.
  • These credits would continue to be refundable for smaller businesses.

Enhanced audit activity

  • The Ministry will direct additional resources to its Flexible and Integrated Risk System (FAIRS) program to identify high-risk audit cases across several tax statutes (including Employer Health Tax) administered by the Ontario Ministry of Finance.


Tobacco tax

As previously announced, the budget proposes to increase the tobacco tax rate from 12.35 cents to 13.975 cents per cigarette (or from $24.70 to $27.95 per carton) and per gram of tobacco products (other than cigarettes and cigars) effective 12:01 a.m. Friday, May 2, 2014. Wholesalers of tobacco products that are not collectors of tobacco tax are expected to take an inventory of all tobacco products with the exception of cigars held at end of May 1, 2014 and remit additional tax on this inventory.

Land Transfer Tax (LTT)

  • The Ministry of Finance is reviewing aggressive tax avoidance structures that result in the acquisition of land without payment of LTT and issuing assessments as appropriate.
  • The budget also proposes to introduce a general anti-avoidance rule into the LTT Act, applicable to transactions that are completed after May 1, 2014 and transactions that are part of a series of transactions to be completed after May 1, 2014.


The 2014 federal budget proposed several personal and corporate income tax measures, including proposals related to:

  • Medical expenses;
  • Tax changes for farmers and fishers;
  • Amateur athlete trusts;
  • Estate donations;
  • Non-resident trusts;
  • Pension transfer limits;
  • New limitations on shifting income to a minor child;
  • Donations of ecologically sensitive land and certified cultural property;
  • Clean energy generation equipment; and
  • Tax on insurance swaps and offshore regulated foreign financial institutions.

Under the terms of the Canada-Ontario Tax Collection Agreement, Ontario will adopt these measures and their effective dates once federal legislative and regulatory changes have been approved.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Crowe Soberman LLP
In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions