Response to COVID-19: Ontario Employer Health Tax Exemption Increase for 2020

On March 25, 2020, Ontario’s Minister of Finance, Rod Phillips, presented the province’s Economic and Fiscal Update. One of the changes announced was an increase to the Employer Health Tax (EHT) exemption for 2020 – from $490,000 to $1,000,000 – due to the unique circumstances caused by the coronavirus (COVID-19) in Ontario. In the same announcement, a five-month relief period  for Ontario businesses who are unable to file or remit select provincial taxes on time was also provided.

The EHT exemption is increasing from $490,000 to $1 million for the 2020 tax year. On January 1, 2021, the EHT exemption will return to $490,000. The temporary increase is retroactive to January 1, 2020.

Eligible employers (private-sector employers with annual payrolls up to $5,000,000) will save as much as $9,945 in 2020. This exemption increase delivers tax relief to businesses around the province so that they can take the necessary time to support employee health and safety and their continued operations during these unprecedented times.

What Do Employers Need to Know About This Exemption?

It’s important to remember that only the exemption amount is changing; eligibility for the tax rate, tax exemption, and everything else remains the same. The following link explains in more detail about the basic rules regarding the Employer Health Tax.

How to Apply for the New Extension

Employers (including associated groups of employers) with total Ontario remuneration (may also be called payroll) over $5,000,000 are not eligible for the increased exemption, just as they are not eligible for the exemption currently.

If a registered charity already has two or more qualifying charity campuses, it can claim the $1,000,000 exemption for each qualifying charity campus for the 2020 tax year.

An employer is defined as a:

• Non‑profit organization;
• Individual;
• Partnership;
• Corporation;
• Charity;
• Trust;
• Association, or
• Government (including federal, municipal, provincial, school board, university, hospital).

2020 Tax Year Requirements for Filing

As specified, only the amount for the exemption claimed will change during this exemption period. The annual return form will not be changing.

• If you have not paid any EHT yet for 2020 and you will not owe any EHT for 2020 because of the new exemption amount (and you are not an associated employer), you do not need to file an EHT return for 2020.
• If your organization has already filed a final or special return for 2020, the Ministry will be reviewing all 2020 EHT returns that have already been filed and correcting the returns for the new exemption level.
• If your business no longer needs to file an EHT return as a result of the increased exemption amount, you do not need to contact or notify the Ministry of Finance.
• If your business is still required to file an EHT return, you can also benefit from additional new relief measures announced in the March 2020 Economic and Fiscal Update.

Instalment Payment Changes

Those eligible for the EHT exemption will begin making instalment payments after payroll has surpassed the new $1,000,000 exemption level.

You do not need to contact or notify the Ministry of Finance if your business no longer needs to make instalment payments because of the increased exemption amount.

Contact the Ontario Ministry of Finance

For more questions regarding the Employer Health Tax and the exemption, we encourage you to check out the FAQs outlined on the Ministry of Finance website. Mentor Works does not specialize in tax exemptions. This article is for educational purposes only. Additional ways to get in contact with the Ontario Ministry of Finance include:

Phone: 1-866-668-8297
Fax: 1-866-888-3850
Talk To You (TTY): 1-800-263-7776

Mentor Works is actively monitoring provincial and federal resources available to Canadian individuals and businesses during COVID-19. To learn more about the latest announcements and register for an upcoming webinar, please refer to our COVID-19 Government Support for Canadian Businesses page.