Personal Tax Planning
1. Increased threshold for all income tax brackets
The taxable income thresholds in all three Ontario provincial tax brackets were increased by 0.7 per cent in 2010, reflecting changes to Canada's consumer-price index (CPI) in Ontario. All indexed non-refundable tax credits also increased by 0.7 per cent.
2. Reduction in lowest personal income tax rate in 2010
The government reduced the rate in the lowest provincial tax bracket by one percentage point, from 6.05 per cent, to 5.05 per cent, effective January 1, 2010.
3. Decrease in provincial surtax level in 2010
The government decreased the basic tax level at which provincial 20 per cent and 36 per cent surtaxes are imposed in 2010. The 20 per cent surtax is imposed on basic Ontario tax over $4,006 in 2010, down from $4,257 in 2009. The 36 per cent surtax level (for a total of 56 per cent) decreased to $5,127 of basic tax in 2010, down from $5,370 of basic tax in 2009.
4. Harmonized Sales Tax
The Ontario government adopted a harmonized sales tax (HST) on July 1, 2010. The HST is 13 per cent, combining the former provincial retail sales tax of 8 per cent, with the federal goods and services tax (GST) of five per cent.
A one-time Ontario sales tax transition benefit for qualified Ontario residents of up to $300 for single individuals and $1,000 for families, including single-parent households, is available in three instalment payments, in June 2010, December 2010, and June 2011. Benefit payments are reduced when a single person's adjusted net income exceeds $80,000 and a family's adjusted net income exceeds $160,000.
5. Replacement of existing property and sales tax credit
The Ontario government introduced two new separate, refundable property and sales tax credits in 2010, to replace the existing combined property tax and sales tax credits. The new Ontario property tax credit (OPTC) is worth up to $900 for individuals under the age of 65and up to $1,025 for senior citizens. This amount is phased out at two per cent of adjusted family net income above $20,000 for single individuals, and above $25,000 for families.
The Ontario sales tax credit (OSTC) is worth up to $260 for each adult and child. It is reduced by four per cent of adjusted net income above $20,000 for single individuals, and $25,000 for families.
Both the OPTC and OSTC thresholds will be indexed annually in future to account for CPI increases due to inflation. It has been proposed that the OPTC will convert to a new Ontario energy and property tax credit, with payments beginning in 2011.
6. Proposed new Ontario children's activity tax credit
The Ontario government has proposed a new, refundable Ontario children's activity tax credit, effective January 1, 2010. Under the proposed credit, parents and guardians would be able to claim up to $500 of eligible expenses per child and receive a refundable tax credit worth up to $50 per child who is under 16. The credit would be worth up to $100 for a child under 18 who has a disability.
7. Various parallel measures to federal initiatives
The Ontario provincial government has paralleled certain measures announced by the federal government, including allowing a rollover of certain registered plan proceeds to a registered disability savings plan (RDSP); changes to the scholarship exemption and education tax credit; treatment of employee stock options; and various capital cost allowance (CCA) measures, among others.
Reference: 2010-11 Personal Tax Planning Guide, CGA Ontario. You can view the guide or order a hardcopy online at www.cga-ontario.org/Publications/Information_Booklets