{"id":7073436,"date":"2026-10-02T22:00:17","date_gmt":"2026-10-02T22:00:17","guid":{"rendered":"https:\/\/fivemor.com\/?p=7073436"},"modified":"2026-10-02T22:00:17","modified_gmt":"2026-10-02T22:00:17","slug":"ontarios-provincial-budget-what-business-owners-and-investors-need-to-know","status":"publish","type":"post","link":"https:\/\/fivemor.com\/?p=7073436","title":{"rendered":"Ontario\u2019s Provincial Budget: What Business Owners and Investors Need to Know"},"content":{"rendered":"


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On March 26, 2026, the Ontario Government tabled its 2026 provincial budget. While the budget covers\u00a0several\u00a0significant\u00a0initiatives,\u00a0there are a few key highlights we have summarized for\u00a0what you need to know and, importantly, what actions may be worth considering before key deadlines arrive.<\/span><\/p>\n

1. Small Business Corporate Tax Rate Reduction<\/span><\/b><\/h4>\n

Ontario is permanently reducing its small business corporate income tax (CIT) rate from\u00a0<\/span>3.2% to 2.2%<\/span><\/b>,\u00a0with an effective date of\u00a0July 1, 2026. This brings the combined federal and Ontario small business corporate tax rate down to\u00a0<\/span>11.2%<\/span><\/b>. For taxation years that straddle July 1, 2026, the reduced rate will be prorated.<\/span>\u00a0<\/span><\/p>\n

This is welcome news for small business owners, as it is designed to improve cash flow and support reinvestment and growth.<\/span>\u00a0<\/span><\/p>\n

There is an offsetting change to be aware of on the personal side.<\/span><\/b>\u00a0To correspond with the lower corporate rate, the non-eligible dividend tax credit will be reduced from 2.9863% to 1.9863%, effective January 1, 2027. This means the top personal tax rate on ineligible dividends\u00a0for\u00a0Ontario\u00a0residents\u00a0will increase from 47.74% to 48.89% starting in 2027.<\/span>\u00a0<\/span><\/p>\n

From an integrated tax perspective (looking at the combined corporate and personal tax on income earned through a corporation), the numbers shift as follows:<\/span>\u00a0<\/span><\/p>\n

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  • Active income subject to the small business rate:<\/span><\/b>\u00a0The integrated rate increases from 54.12% to 54.61%,\u00a0representing\u00a0a modest increase in the cost of earning active income through a corporation versus personally (from\u00a0approximately 0.59%\u00a0to 1.08%).<\/span>\u00a0<\/span><\/li>\n<\/ul>\n
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    • Investment income:<\/span><\/b>\u00a0The integrated rate increases from 57.93% to 58.86%.<\/span>\u00a0<\/span><\/li>\n<\/ul>\n
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      • Capital gains:\u00a0<\/span><\/b>The integrated rate increased from 28.98% to 29.43%.<\/span>\u00a0<\/span><\/li>\n<\/ul>\n

        Planning opportunity:<\/span><\/b>\u00a0Because the reduction to the dividend tax credit does not take effect until January 1, 2027, there may be an advantage\u00a0in accelerating\u00a0the payment of ineligible dividends before the end of the 2026 calendar year. If this is relevant to your situation, we encourage you to speak with your RLB advisor sooner rather than later to evaluate your options.<\/span><\/p>\n

        2. Expiration of the Regional Opportunities Investment Tax Credit (ROITC)<\/span><\/b><\/h4>\n

        The Ontario government has announced that the\u00a0<\/span>Regional Opportunities Investment Tax Credit (ROITC) will expire on January 1, 2027<\/span><\/b>. The government has cited improved employment outcomes in previously eligible regions as its rationale for\u00a0this phase out.<\/span>\u00a0<\/span><\/p>\n

        Capital expenditures incurred on or before\u00a0<\/span>December 31,\u00a02026<\/span><\/b>\u00a0will remain eligible for the credit. If you have been considering capital investments in a designated region, it may be worth reviewing whether those plans can be advanced to ensure eligibility before the credit\u00a0ceases\u00a0to exist.<\/span>\u00a0<\/span><\/p>\n

        It is important to note that this change applies only to the ROITC. The\u00a0<\/span>Ontario Made Manufacturing Investment Tax Credit (OMMITC) is unaffected<\/span><\/b>\u00a0\u2013 no changes to that program were announced in this budget.<\/span>\u00a0<\/span><\/p>\n

        If you are unsure whether your planned investments qualify, or would like\u00a0help\u00a0assessing your timeline, the RLB tax team is happy to\u00a0assist.<\/span><\/p>\n

        3. Enhanced HST Rebates for New Housing<\/span><\/b><\/h4>\n

        Ontario is introducing temporary enhancements to the existing HST New Housing Rebate and New Residential Rental Property Rebate. These measures are intended to improve affordability and stimulate new housing supply, with the enhancements proposed to run from\u00a0<\/span>April 1,\u00a02026\u00a0to March 31, 2027<\/span><\/b>.<\/span>\u00a0<\/span><\/p>\n

        Here is how the enhanced rebate structure works:<\/span>\u00a0<\/span><\/p>\n

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        • The\u00a0<\/span>full 8% provincial\u00a0portion\u00a0of HST<\/span><\/b>\u00a0will be rebated for qualifying new homes\u00a0valued\u00a0up to\u00a0<\/span>$1 million<\/span><\/b>, equal to a rebate of up to $80,000.<\/span>\u00a0<\/span><\/li>\n<\/ul>\n
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          • The provincial government is working with the federal government to mirror this incentive for the 5% federal\u00a0portion, which would bring the combined rebate up to\u00a0<\/span>$130,000<\/span><\/b>\u00a0for eligible homes. Note that the federal\u00a0component\u00a0is pending agreement and not yet confirmed.<\/span>\u00a0<\/span><\/li>\n<\/ul>\n
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            • The $130,000 rebate is\u00a0maintained\u00a0for homes\u00a0valued\u00a0up to\u00a0<\/span>$1.5 million<\/span><\/b>.<\/span>\u00a0<\/span><\/li>\n<\/ul>\n
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              • For homes valued between\u00a0<\/span>$1.5 million and $1.85 million<\/span><\/b>, the rebate is reduced on a straight-line basis from $130,000 to $24,000.<\/span>\u00a0<\/span><\/li>\n<\/ul>\n
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                • Homes valued above\u00a0<\/span>$1.85 million<\/span><\/b>\u00a0are eligible for the $24,000 rebate only.<\/span>\u00a0<\/span><\/li>\n<\/ul>\n

                  These changes are particularly relevant for homebuilders, developers, and purchasers of new construction properties. If you are involved in a new housing project or considering a purchase, it is worth understanding how these rebates may apply to your specific situation.<\/span>\u00a0<\/span><\/p>\n

                  Questions?\u00a0Let\u2019s\u00a0Talk.<\/span><\/b>\u00a0<\/span><\/p>\n

                  Tax legislation changes quickly, and the implications can vary depending on your circumstances. The RLB tax team is here to help you understand how these updates may affect you and to\u00a0identify\u00a0any planning opportunities before key deadlines pass.\u202f<\/span>Reach out to your RLB advisor today<\/span><\/b><\/a>\u00a0to start the conversation.<\/span>\u00a0<\/span><\/p>\n<\/p><\/div>\n