On November 2, 2023, Minister of Finance Peter Bethlenfalvy presented Ontario’s fall economic statement. Titled 2023 Ontario Economic Outlook and Fiscal Review: Building a Strong Ontario Together, the update projects a $5.6 billion deficit for 2023–24—a significant increase from last spring’s budget—while touting the province’s robust growth in population, job creation, and business investment amidst ongoing economic uncertainty.
The economic statement proposes initiatives designed to improve Ontario’s infrastructure, healthcare, and housing affordability, including a few significant tax measures, as summarized below.
Enhanced HST Rebate for Purpose-Built Rental Housing
To encourage the construction of new rental housing, this fall’s economic statement contains a proposal to increase the existing Ontario Harmonized Sales Tax (HST) New Residential Rental Property Rebate to 100% of the provincial component of the HST paid, with no maximum, in relation to qualifying projects. The current rebate is equal to 75% of the provincial portion of the HST paid and capped at a maximum of $24,000.
This enhanced rebate will work hand in hand with the enhancements proposed by the federal government for the Goods and Services Tax/Harmonized Sales Tax (GST/HST) New Residential Rental Property Rebate on September 14. See our Tax Alert | Enhanced GST Residential Rental Property Rebate Announced for further details.
Consistent with the federal proposal, the enhanced rebate will be available for eligible new rental housing projects in Ontario that commence between September 14, 2023, and December 31, 2030 (inclusive), provided construction is completed by December 31, 2035. Eligible residential units will include those that qualify for the existing federal rebate and are in buildings containing at least four private apartment units or 10 private rooms or suites, with 90% or more of the units designated as long-term rentals. Substantial renovations of existing residential housing units will not qualify for the enhanced rebate.
As the enhancement of this rebate requires federal regulatory changes, the provincial government has committed to collaborating with its federal counterparts to implement the enhanced rebate as quickly as possible.
Gasoline and Fuel Tax Measures
Extension of Temporary Rate Reductions
As announced in advance of the economic statement, the government has committed to extending the temporary tax rate cuts for gasoline and diesel fuel put in place on July 1, 2022. Under this proposal, the tax rate on gasoline and diesel will remain at nine cents per litre until June 30, 2024. These gasoline and fuel tax reductions, at 5.7 cents and 5.3 cents per litre, respectively, were previously set to expire on December 31, 2023.
Technical Amendments
The Gasoline Tax Act will be amended to extend the International Fuel Tax Agreement (IFTA) registration, reporting, and audit requirements to Ontario-based interjurisdictional carriers using alternative fuels.
Coordinated Vaping Product Taxation Agreement
The government has indicated that it will accept an invitation from the federal government to participate in a coordinated vaping tax. Under this agreement, an additional excise duty will be levied on vaping products planned to be sold in Ontario. The additional levy will be at the same rate as the existing federal excise duty, with the resulting revenue directed to Ontario.
Further details on the implementation of this coordinated excise duty on vaping products in Ontario are expected to be released soon.
Enhanced Flow-Through Share Tax Credit
The government also announced that it will expand eligibility for the Ontario Focused Flow-Through Share Tax Credit to include specified critical mineral exploration expenditures that qualify for the federal Critical Mineral Exploration Tax Credit and are renounced on or after January 1, 2023. This measure is intended to promote further mineral exploration in Ontario by providing a refundable tax credit to eligible individuals for 5% of qualifying expenses.
More Information
Further information on Ontario’s 2023 fall economic statement may be found on the province’s website at:
https://budget.ontario.ca/2023/fallstatement/index.html
If you have any questions about how these proposed changes might impact your organization, please do not hesitate to contact the Ryan TaxDirect® line at taxdirect@ryan.com or 1.800.667.1600.