Ontario’s business operators got notice of some targeted tax relief, some new tax deferral flexibility and a looming tax credit termination in the newly released 2026 provincial budget, but there is still no indication when a comprehensive property value reassessment can be expected. That’s in addition to other announced stimuli for the housing sector.
Entities that qualify for the small business corporate income tax rate can look forward to reduced payouts, with the Ontario government’s promise to cut the provincial levy by a full percentage, taking it down to 2.2 per cent as of July 1, 2026. That applies on the first $500,000 of annual active business income, provided that the taxpayer is a Canadian controlled private corporation (CCPC) that holds no more than $10 million in taxable capital in Canada. As well, other CCPCs up to a threshold of $50 million worth of taxable capital are eligible for prorated discounts on Ontario’s full corporate rate (11.5 per cent) for their first $500,000 of earnings.
“Through the preferential small business CIT (corporate income tax rate) rate, the Province already provides $3.45 billion per year in CIT relief to small businesses across Ontario,” the budget document reports.
It’s estimated that more than 375,000 Ontario businesses will see an additional tax reduction of as much as $5,000 once the new measure is in place for the full 2027 tax year. In 2026, eligible taxpayers will receive a blended discount, combining the differing rates in the first and second halves of the year, which is projected to equate to $230 million in foregone provincial revenue for its 2026-27 fiscal year. That will then climb to $450 million in 2027-28.
Meanwhile, there are just nine months left to make use of the regional opportunities investment tax credit, which provides a 10 per cent rebate on up to $450,000 of the costs of acquiring, constructing, expanding or renovating a commercial or industrial building in 34 designated jurisdictions throughout northern, eastern, central and southwest Ontario. The refundable tax credit for CCPCs was introduced in 2020 as an economic stimulus measure in regions of the province where the employment growth rate lagged the provincial average during the years from 2009 to 2019. That covers most areas except Ottawa, the Greater Toronto and Hamilton Area and the Barrie, Niagara, Kitchener-Waterloo and Guelph vicinities.
The tax credit — which was temporarily bolstered to 20 per cent for a 21-month period during the COVID-19 pandemic — applies on qualifying expenditures in excess of $50,000 up to a ceiling of $500,000. The Ontario government intends to eliminate it as of Jan. 1, 2027, citing an employment uptick in the subject regions and a desire “to focus tax support more broadly through measures like the proposed small business CIT rate cut and accelerated write-offs” (the latter which are aligned with new federal tax measures).
It’s projected the tax rebate’s termination will garner $17 million in additional provincial revenue in the 2026-2027 fiscal year and $70 million in 2027-28. In contrast, new flexibility to defer upfront tax on insurance premiums when payments are made into a funded benefit plan is projected to cause a $115 million dip in revenue in 2026-27.
Under Ontario’s Corporations Tax Act, plan holders (employers) and members (employees) currently must pay tax on insurance premiums — set at 2 per cent on life, accident and sickness insurance premiums — when contributions are deposited into a funded benefit plan, which has a regular schedule of specified amounts to maintain a balance that exceeds foreseeable payouts in the 30-day short term. For all other types of benefit plans, defined as “unfunded”, tax on insurance premiums is owing only when payouts to members are withdrawn.
The Ontario government now proposes to give plan holders with funded benefit plans the choice to defer the insurance premium tax until funds are withdrawn. Legislation is included in the budget bill to enable the change as of April 1, 2026, but yet-to-be-drafted regulations will be required to establish rules and procedures for revoking/adopting tax payment options. The explanatory notes accompanying the budget bill state that “the regulations may have retroactive effect”.
The budget document announces that Ontario municipalities will be relieved from the administrative task of distributing education property taxes (EPT) to school boards beginning in 2028, and it hints that the government is considering new policy options related to property tax rates for new purpose-built student housing. However, the timing of the next provincial property reassessment is not divulged — six years after that exercise was initially postponed and 30 months after a review of the property assessment and taxation system was launched.
“The government continues to receive feedback on approaches that could make the property assessment and taxation system more effective from a broad range of stakeholders, including residential and business property owners and their affiliated organizations and the professional property tax and assessment sector,” the budget document states.
The budget document announces that legislative changes are pending to designate the provincial government as the administrative body responsible for conveying funds collected through education property tax to school boards, and promises the provincial government will “work closely” with municipalities and school boards before implementing new processes. As proposed, municipalities would remit the education portion of property taxes directly to the Ontario government, which would then combine the EPT with the province’s share of education funding into one streamlined payment to school boards.
“School boards would continue to receive their full funding but would receive it directly through provincial payments, rather than separate payments from municipalities and the Ministry of Education,” the budget document states. “This measure would significantly reduce the number of transactions between municipalities and school boards and thereby lessen both the administrative burden and costs for Ontario, municipalities and school boards.”
