Canada: 2016 Ontario Budget Commentary - February 25, 2016


On February 25, 2016 Finance Minister Charles Sousa tabled his fourth Budget.

The deficit for the 2015-16 fiscal year is projected to be $5.7 billion, which is $2.8 billion less than forecasted in the 2015 Budget. The deficit is projected to drop to $4.3 billion for 2016-17 and to be eliminated by 2017-18. Furthermore, the government is also projecting a balanced budget in 2018-19.

The Budget does not include any changes to Ontario’s personal tax rates but certain personal tax credits are being eliminated. In addition, changes to the so-called “sin taxes” are proposed. From a business perspective, although there are no changes to corporate tax rates, there are proposed reductions to certain credits.

Measures Affecting Individuals

Personal Income Tax Rates

While this Budget does not propose any changes to personal income tax rates, federal personal rates were changed effective January 1, 2016. The resulting top marginal rates where income is over $220,000 are as follows:

Type of Income 2016 2015
Salary and other income 53.53% 49.53%
Capital gains 26.76% 24.76%
Eligible dividends 39.34% 33.82%
Non-eligible dividends 45.30% 40.13%

Tuition and Education Tax Credits

The Budget proposes a radical restructuring of post-secondary education funding. The changes are intended to target increased support for students from lower income families.

Ontario Tuition and Education Credits (“TEC”) are being eliminated effective fall 2017. Tuition for studies after September 4, 2017 will not be eligible for the credit. In addition, months of study after August 2017 will not be eligible. Where the student is a resident of Ontario as of December 31, 2017, any carry forward TEC will continue to carry forward and can be claimed in the future. If the student becomes an Ontario resident after 2017, any tuition and education amounts carried forward from another province cannotbe claimed.

The TEC, as well as the 30% Off Tuition Grant, Ontario Access Grants and other grants, will be replaced by the Ontario Student Grant (“OSG”) starting with the 2017-18 school year. Where family income is $50,000 or less the OSG should exceed average tuition. No student will receive less than that to which they are currently entitled. 

Children’s Activity Tax Credit

The Children’s Activity Credit (“CATC”) is a refundable credit designed to assist parents with the cost of enrolling children in various extracurricular activities. The CATC is to be eliminated effective January 1, 2017, as it largely benefits higher income families.

Healthy Homes Renovation Tax Credit

The Healthy Homes Renovation Tax Credit (“HHRTC”) is intended to assist with home renovations that improve safety and/or accessibility of the home for seniors. The HHRTC is 15% of up to $10,000 of eligible expenditures. Since there has been little “take up” on the HHRTC, it is to be eliminated January 1, 2017.

Tax on Split Income

The Budget proposes that, effective January 1, 2016, Ontario will parallel the federal taxation of income split with related minors, commonly referred to as “Kiddie Tax”. Split income will be taxed at Ontario’s top marginal rate, with no surtax applying.

Simplification of Personal Income Tax

The Budget indicates that the government is planning to examine ways to simplify the personal tax calculation.

Measures Affecting Businesses

Corporate Income Tax Rates

The Budget proposes no changes to corporate income tax rates, which are as follows for 2016:

Income Ontario Federal Combined
Small Business income 4.5% 10.5% 15.0%
CCPC1 investment income 11.5% 38.67% 50.17%
Manufacturing and Processing income 10.0% 15.0% 25.0%
General income 11.5% 15.0% 26.5%

Research and Development Tax Credits

The Budget proposes reductions to research and development tax credits.

The Ontario Research and Development Tax Credit (“ORDTC”) is a 4.5% non-refundable credit. The ORDTC rate is to be reduced to 3.5% of eligible expenditures effective June 1, 2016.

The Ontario Innovation Tax Credit (“OITC”) is a 10% refundable credit for small to medium companies. The rate is to be reduced to 8% of eligible expenditures effective June 1, 2016.

Where the taxation year straddles June 1, 2016 the rate will be pro-rated for both the ORDTC and the OITC.

Apprenticeship Training Tax Credit

As announced in the 2015 Budget, the Apprenticeship Training Tax Credit (“ATTC”) is being reviewed to ensure that it meets its objectives. Budget 2016 confirms that the ATTC review is continuing along with other reviews of initiatives in support of apprenticeships.

Workplace Safety Insurance Premiums

As a consequence of steps taken in respect of cost reductions and improving the financial condition of the Workplace Safety and Insurance Board (“WSIB”), the Budget projects a significant reduction in WSIB premiums, starting in 2017.

Other Taxes

Tobacco Tax

Effective 12:01 a.m. February 26, 2016, the tobacco tax is being increased from 13.975 cents to 15.475 cents per cigarette and gram of tobacco products other than cigars. The Budget proposes to inflation index the tobacco tax annually after 2016.

Alcohol Charges

The Budget proposes the following changes in respect of alcohol charges:

  • Increase in the ad valorem wine mark-up by the LCBO by two percentage points effective June 2016 with further increases of two percentage points in each of April 2017 and 2018 and one percentage point in April 2019;
  • Increase in the basic tax on non-Ontario wine purchased at winery retail stores by one percentage point in each of June 2016, April 2017, April 2018 and April 2019;
  • Increase in the minimum retail price for table wine to $7.95 per 750 ml bottle, including deposit, phased in over three years;
  • Phase-in of minimum retail prices for cider, fortified wine and low-alcohol wine over three years;
  • Establishment of higher basic wine tax rates for sales at winery retail outlets in grocery stores; and
  • Replacement of the current mark-up and commission structure with a tax on purchases at on-site distillery retail stores.

Underground Economy

The Budget indicates that the government is continuing to focus on underground economy activities in all high-risk sectors. It will work with the Canada Revenue Agency in launching specialized audit teams. It will also propose legislation to enhance enforcement capabilities.

Tackling Climate Change

The Budget indicates that Ontario intends to move forward with a cap-and-trade system in respect of carbon pricing, effective January 1, 2017. The program will place a cap on greenhouse gas emissions, create tradable emissions allowances for a given period and require covered emitters to hold allowances equal to their emissions in that period. Those who reduce their emissions will be able to sell their excess allowances in the carbon market. As a result of this program, it is projected that the price of gas at the pump will increase by 4.3 cents per litre, average household natural gas costs will rise by $5 per month and residential electricity costs decrease by $2 per month.

Ontario Retirement Pension Plan

Legislation to implement the Ontario Retirement Pension Plan will be introduced in spring 2016. The employer verification and enrolment process will start in 2017, with employer and employee contributions beginning in 2018.

Property Tax Measures

The Budget confirms the continued review of the property tax assessment system including the Business Property Tax Capping Program, the Vacant Unit Rebate and Vacant/Excess Land Subclasses. Ontario will also continue consultations on the Provincial Land Tax which applies to land outside municipal areas in Northern Ontario.

User Fees

As of January 2016, hospitals have been directed not to raise their daily parking rates for the next three years. The Budget introduces additional measures effective October 1, 2016 that will reduce parking costs for frequent hospital users.

Ontario has revised its fee schedule for court services and will continue to update licensing and vehicle validation fees. The government will eliminate certain fees related to adoptions and the Drive Clean emissions test. Other fees will be reviewed for potential elimination or updating.


1. Canadian-Controlled Private Corporation

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.

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
Check to state you have read and
agree to our Terms and Conditions

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.

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 by clicking here .

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.


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.