Summary#

Bill 195, the Cutting Taxes on Small Businesses Act, 2024, would amend Ontario’s Taxation Act, 2007; it would not create a separate law or program. It would increase the Ontario small business deduction rate and the income limit used in its calculation, with the stated goal of reducing taxes for eligible small businesses.

• The deduction rate would rise from 8.3% to 9.9% for the relevant days from January 1, 2024 onward.
• The income limit used for the deduction would rise from $500,000 to $600,000.
• The bill would also change a related surtax formula to use the $600,000 limit.
• The changes would be deemed to have started on January 1, 2024.

What it means for you#

• Eligible small businesses: The higher deduction rate and limit are intended to reduce Ontario corporate tax on income that qualifies for the deduction. The exact tax change for any business would depend on its circumstances and the full tax rules.
• Businesses and other taxpayers: The bill does not create a new application process, service, or tax. The supplied text does not say that businesses must apply or take another step to receive the change.
• General public: The bill changes tax rules, not personal income tax rates.

Money#

No cost or revenue estimate is available in the supplied material.

• The bill would reduce tax for businesses that qualify, but it gives no estimate of the resulting revenue loss.
• The supplied text does not identify administrative or staffing costs.

What is unclear#

• The Taxation Act, 2007 itself was not supplied, so the bill’s changes could not be checked against the full current rules.
• The supplied material does not set out all eligibility rules, exceptions, or how the deduction applies in different cases.
• It does not explain how the increased limit interacts with other tax rules or the related surtax calculation.
• The bill does not provide an estimate of how many businesses would benefit or by how much.
• The changes are deemed to start on January 1, 2024, but the material does not explain how that date would be handled for tax filings or payments.

Case for#

• A possible argument for the bill is that a higher deduction rate would lower tax for businesses with qualifying income.
• Raising the limit from $500,000 to $600,000 could allow more income to fall within the limit used for the deduction.
• Updating the related surtax formula to use the same higher limit could keep that formula aligned with the change.

Case against#

• One concern is that the bill gives no estimate of the public revenue the tax reduction would give up.
• The bill does not show which businesses would benefit most or the size of the benefit for different businesses.
• Because the full tax law was not supplied, it is unclear how the changes would interact with other eligibility rules and tax calculations.