On March 25, 2020, the Ontario government announced it is increasing the Employer Health Tax (EHT) exemption for 2020 from $490,000 to $1 million due to the special circumstances caused by the coronavirus (COVID-19) in Ontario.
EHT Exemption Increase Overview
Retroactive to January 1, 2020, the EHT exemption is increasing from $490,000 to $1 million for the 2020 tax year. The EHT exemption will return to $490,000 on January 1, 2021.
This change will provide quick relief to employers that pay the EHT.
Only the Exemption is Changing
Only the exemption amount is changing; eligibility for the tax exemption, tax rates and everything else remains the same. For more information on the EHT exemption, visit https://www.fin.gov.on.ca/en/guides/eht/foremployers.html
Applying the New Exemption
If a registered charity already has two or more qualifying charity campuses, it can claim the $1 million exemption for each qualifying charity campus for the 2020 tax year.
Employers, including associated groups of employers, with total Ontario remuneration over $5 million are not eligible for the increase exemption, just as they are not eligible for the exemption currently.
Changes to Instalments
You will begin making your instalment payments after your payroll has exceeded the new $1 million exemption level.
If your business no longer needs to make instalment payments 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 make EHT instalment payments, you can also benefit from additional new relief measures announced in the March 2020 Economic and Fiscal Update.
Filing Requirements for 2020 Tax Year
The annual return form is not changing. Only the amount for the exemption claimed will change.
If you have 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 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 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.
Making Changes to your EHT Payments
If you overpay your EHT during the 2020 tax year because of the increased EHT exemption level, you will be able to make adjustments by decreasing an instalment prior to December 2020 or by making a refund claim.
You may also carry forward your payments to the next year. This will be done automatically unless you request a refund by contacting the ministry.
Additional New Relief Measures
Beginning April 1, 2020, penalties and interest will not apply to Ontario businesses that miss any filing or remittance deadline under select provincial taxes, including EHT. Learn more.
The government is also temporarily suspending audit interactions with most Ontario business and representatives for the month of April 2020.
For more information please visit the Ontario Ministry of Finance website.