Summary#
Bill 12, the Cutting Taxes on Small Businesses Act, 2025, would amend Ontario’s Taxation Act, 2007. Its stated goal is to increase the Ontario small business deduction. The changes are set to apply from January 1, 2026, even if the bill receives Royal Assent later.
- It would raise the small business deduction rate from 8.3% to 9.9% for days in a taxation year after December 31, 2025.
- It would raise the business limit used for the deduction from $500,000 to $600,000.
- It would change the related surtax formula to use $600,000 instead of $500,000.
What it means for you#
- Businesses that qualify for the Ontario small business deduction: The higher rate and limit could mean lower Ontario corporate income tax, depending on the business’s income and eligibility.
- Other businesses and individuals: The bill does not directly change personal income tax, introduce a grant, or require businesses to apply for a new program.
- Ontario taxpayers: The bill changes tax rules, but the supplied material does not estimate the effect on provincial revenue.
Money#
No cost or revenue estimate is available in the supplied material.
- Businesses that qualify may pay less Ontario corporate income tax under the changed rate and limit.
- The bill provides no estimate of how much tax revenue Ontario might give up. It does not authorize a specific amount of spending.
What is unclear#
- The parent Taxation Act, 2007 was not supplied, so the existing eligibility rules, tax calculation details, and how the surtax formula works cannot be checked against current law.
- The bill does not explain which businesses qualify or how the higher limit interacts with other eligibility rules.
- The effect on any one business would depend on its circumstances; the supplied material gives no examples or estimates.
- The bill sets January 1, 2026 as the start date, but does not explain how businesses should handle tax filings if it receives Royal Assent after that date.
Case for#
- A possible argument for the bill is that a higher deduction rate would reduce tax for businesses that qualify.
- Raising the business limit could allow more income to fall within the limit used for the deduction.
- Changing the related surtax formula to match the higher limit keeps that formula aligned with the bill’s new amount.
Case against#
- The bill does not estimate the reduction in provincial tax revenue or show how many businesses would benefit.
- The supplied material does not explain how the changes interact with current eligibility rules or the surtax calculation.
- A possible trade-off is lower taxes for qualifying businesses against less revenue available for other public purposes; the bill provides no estimate to assess the scale.