Ontario Fall Economic Statement Tax Updates 2024-2025

November 22, 2024

Overview

On October 30, 2024, Ontario’s Minister of Finance has delivered the 2024 Ontario Fall Economic Statement “Building Ontario for You”. This comprehensive summary highlights the key changes introduced in the Fall Economic Statement.

Personal Income Tax Measures

New taxpayer rebates

The Ontario government introduces a refundable Personal Income Tax credit that would provide a one-time $200 taxpayer rebate to eligible individuals who meet all the following criteria:

Aged 18 or older at the end of 2023;
Resident in Ontario on December 31, 2023;
Filed their 2023 Income Tax and Benefit Returns by December 31, 2024;
Not bankrupt or incarcerated in 2024.

For Ontario family with children who qualify the Canada Child Benefit (CCB) for 2024, an additional one-time $200 rebate is proposed for each eligible child under age 18 for the person who receives the CCB in respect of the child and is a resident of Ontario. In shared custody situations, the rebate would be split based on the most recent CCB distribution.

Responding to the Federal Alternative Minimum Tax Increases

Ontario is proposing to lower its Alternative Minimum Tax (AMT) from 33.67% to 24.63%, starting with the 2024 tax year. The Ontario AMT tax credit would also be adjusted to 24.63% starting with the 2025 tax year. These adjustments ensure that Ontario maintains an effective rate of 5.05%, mitigating the impact of the increase in federal AMT rate.

Ontario Fertility Treatment Tax Credit

Beginning in 2025, the Ontario government will introduce a new tax credit to support families who are seeking fertility treatment. The new tax credit builds on top of the existing medical expense tax credit, covering up to 25% of eligible fertility treatment expenses (up to a maximum of $5,000 per year). Eligible expense includes IVF cycles, fertility drugs, travel for treatment and diagnostic testing.

Indirect Tax measures

Continuing to Extend the Temporary Gas Tax and Fuel Tax Rate Cuts

On July 1, 2022, the Ontario government implemented temporary reductions in the gasoline tax rate by 5.7 cents per litre and the fuel tax (diesel) rate by 5.3 cents per litre. Presently, both gasoline and fuel taxes stand at 9 cents per litre. These tax cuts were scheduled to conclude on December 31, 2024, at which point the tax rates will revert to 14.7 cents per litre for gasoline and 14.3 cents per litre for fuel.

The Ontario government will extend the current rate cuts under the Gasoline Tax Act and the Fuel Tax Act for an additional six months, until June 30, 2025.

Lowering Taxes on Purpose-Built Rental Housing

The Ontario government, in collaboration with the federal government, has eliminated the full 13% Harmonized Sales Tax (HST) on qualifying new purpose-built rental housing. The 8% provincial portion of the HST is removed through the Ontario HST rebate for purpose-built rental housing. This enhanced rebate applies to rental projects that meet the eligibility criteria for the federal GST/HST rebate for purpose-built rental housing. To qualify for the enhanced rebate, construction projects must have begun after September 13, 2023, but before 2031, and must be substantially completed before 2036.

Other Tax Measures

Extending and Enhancing the Time-Limited Tax Relief for the Electricity Distribution Sector

Under the Electricity Act, 1998, municipal electricity utilities (MEUs) are subject to a 33% Transfer Tax on the fair market value of electricity assets sold to the private sector. MEUs and Ontario Power Generation Inc. (OPG) entities, exempt from federal and Ontario income taxes, must make Payments in Lieu of Taxes (PILs) equivalent to the income tax they would pay as a taxable corporation.

When an MEU loses tax-exempt status, it is deemed to dispose of its assets at fair market value, with the resulting income subject to PILs. To encourage asset transactions, Ontario introduced time-limited incentives from 2016 to 2018, reducing the Transfer Tax rate to 22% for MEUs with 30,000 or more customers and to 0% for those with fewer customers, while exempting capital gains under the deemed disposition rules. These incentives, extended through 2024, will now be prolonged to 2028 with further enhancements, including a 0% Transfer Tax for all MEUs on electricity asset transfers from 2025 to 2028. Other incentive parameters remain unchanged.

Concluding the Tax Review

In 2023, Ontario’s government began a review of the province’s tax structure, focusing on opportunities to enhance productivity, foster equity, increase simplicity and transparency, and modernize administration. Based on the principles established during the tax review, the government has introduced measures to support businesses, families, and individuals, enhance administrative efficiency, strengthen enforcement within the tax system, and clarify legislative requirements and maintain regulatory flexibility to uphold policy intent.

Moving forward, the government will continue to review potential tax measures that would promote fiscal balance, enhance productivity and fairness, and facilitate the simplicity and modernization of the tax system.

Other Technical Amendments

Proposed legislative amendments include amendments to the following statutes:

Taxation Act, 2007
- to clarify the calculation of the Ontario surtax.
- to parallel the Ontario Child Benefit with the federal government’s extension of Canada Child Benefit eligibility in respect of a child for six months following a child’s death.
- to mirror the expansion of the federal mandatory disclosure rules to provide for disclosure of “notifiable transactions” and “uncertain tax treatments.” The amendments would be effective from June 2023 to align with the federal changes.
- to mirror the changes made to the federal General Anti-Avoidance Rule, generally effective January 1, 2024.

Employer Health Tax Act
- to clarify how the exemption threshold applies to associated employers.
- to align the filing requirements of employers who pay their entire Ontario remuneration in a single month with all other employers.
- to allow the minister to make a refund, if due, at any time provided the request is made within 90 days of an assessment.

Municipal Act, 2001 and to the City of Toronto Act, 2006 to support policy, tax administration and enforcement.

For further information, visit: https://budget.ontario.ca/2024/fallstatement/annex.html