On November 7, 2013, Ontario’s Finance Minister announced proposed measures which if enacted will ultimately increase the tax on non-eligible dividends. This will be achieved by maintaining the non-eligible dividend tax credit rate of 4.5% and then calculating the Ontario surtax on higher income earners before the application of dividend tax credits (currently, the surtax is applied after deducting certain non-refundable credits including dividend tax credits).
As a result of these proposed changes, the combined Federal and Ontario top marginal tax rates on non-eligible dividends (eligible dividend top rates remain for all intents and purposes static while the rate on these dividends for lower income taxpayers will decline) are expected to be as follows:
| Non-Eligible Dividends | ||||
| Taxable Income | 2013 Rate | 2014 Rate | Increase from 2013 Rate | |
| Before Update | After Update | |||
| > $509,000 | 36.47% | 38.60% | 40.13% | 3.66% |
| over $135,054 up to $509,000 |
32.57% | 34.92% | 36.45% | 3.88% |
If you are an owner-manager of a private corporation, consider paying non-eligible dividends in 2013 in order to save up to 3.88% in taxes.
Contact your Collins Barrow tax advisor to explore this and other valuable tax planning opportunities.
Gina Pak CPA, CA is a Tax Manager in the Toronto office at Collins Barrow.
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