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Ontario 2012 Budget Revision Adds 2% Personal Income Surtax
On April 23rd, the Ontario government announced in the legislature that it would revise the budget to implement a 2% surtax on personal taxable income in excess of $500,000, as a concession to the NDP opposition party. The new Deficit-Fighting High-Income Tax Bracket (as described by the Ministry of Finance) will have a rate of 12.16% throughout 2012, as only half of the rate increase will apply for 2012. The rate starting January 1, 2013 will be 13.16%. This is planned to be a temporary measure, to be eliminated when the province is able to eliminate the budget deficit, expected to be in the 2017-18 budget year.
As a result of the existing surtaxes, which are based on Ontario income tax payable, the marginal tax rates for the tax bracket for 2012 for taxable income in excess of $500,000 will be (combined Federal/Ontario):
| 2012 Rates | Other Income |
Capital Gains |
Eligible Dividends |
Non-Eligible Dividends |
| Revised rate | 47.97% | 23.98% | 31.69% | 34.52% |
| Previous rate | 46.41% | 23.20% | 29.54% | 32.57% |
| Increase | 1.56% | 0.78% | 2.15% | 1.95% |
See the April 25, 2012 Ministry of Finance News Release.
| 2013 Rates | Other Income |
Capital Gains |
Eligible Dividends |
Non-Eligible Dividends |
| Revised rate | 49.53% | 24.76% | 33.85% | 36.47% |
| Previous rate | 46.41% | 23.20% | 29.54% | 32.57% |
| Increase | 3.12% | 1.56% | 4.31% | 3.90% |
Although the tax credit rate for donations in excess of $200 normally uses the rate from the highest tax bracket, the Ontario Taxation Act, 2007, s. 21 has been revised to set this rate at 11.16%.
Ontario 2012 Budget - March 27, 2012
The budget states that "While some may argue for tax increases, the McGuinty government will not take that path to balance the budget". The province is taking measures to control costs, including pay freezes for another 2 years for executives at hospitals, colleges, universities, school boards and agencies, and for MPPs.
Ontario Corporate Income Tax (CIT) Rate
The CIT rate reductions planned for 2012 and 2013 will be deferred until a balanced budget is achieved, which is scheduled for 2017-18. See our tables of corporate tax rates.
Business Education Tax (BET) Reductions
It is proposed to temporarily freeze the BET reduction plan, beginning in 2013. Rate reductions already implemented will not be reversed. The government is committed to resuming BET rate reductions when a balanced budget is achieved.
Public-Sector Defined Benefit Pension Plans
The government believes that action must be taken now to reduce the growth in pension costs, making public-sector pensions more affordable for taxpayers and sustainable for pension plan members.
Pension reform is discussed in the budget, including:
 | consulting on issues related to Jointly Sponsored Pension Plans (JSPPs) and Single-Employer Pension Plans (SEPPs) |
| Ontario's concerns with the federal Pooled Registered Retirement Plan (PRPP) model. |
| Ontario believes the implementation of pension innovation should be tied to Canada Pension Plan (CPP) enhancement as part of a comprehensive approach. |
Ontario Trillium Benefit (OTB)
Most people don't seem to realize that the 2011 tax return is being used to calculate their 2012 tax credits, which will be paid out monthly, in advance, starting in July. Under the old system, these credits would not be received until the 2012 tax return was filed in 2013.
Many people have said they would like the choice of receiving these refundable tax credits either as monthly payments throughout the year or as a single payment after the year has ended. In the coming year, the government will look at options for giving people that choice starting next year.
Healthy Homes Renovation Tax Credit
This credit, although discussed in the budget, was proposed in the fall of 2011.
See Ontario Budgets: past editions for more information on the 2012 Budget.
Revised: October 26, 2023