The $1 million exemption implemented in 2020 has been made permanent. Only employers with payroll in excess of $1.2 million will have to make monthly EHT instalment payments.
The Employer Health Tax (EHT) is a deductible payroll tax in Ontario that provides partial funding for the Ontario Health Insurance Plan. The EHT is applied where there is an employer-employee relationship and, the employer pays the employee. Therefore, the EHT does not apply to any self-employed individuals. The EHT is applied to employees who work at or are paid from or through a permanent establishment of the employer in Ontario.
Early in 2020, the Employer Health Tax (EHT) exemption increased from $490,000 to $1 million in an effort to support businesses during the initial months of the COVID-19 pandemic. The 2020 Ontario Budget made this increased $1 million EHT exemption amount permanent. Employers, other than registered charities, cannot claim the exemption if their annual Ontario payroll is over $5 million. The EHT exemption is indexed to inflation, and the next scheduled adjustment for inflation will take place on January 1, 2029.
Beginning in the 2021 tax year, all employers with an annual Ontario payroll over $1.2 million must make monthly EHT instalment payments. Once the employer’s annual payroll exceeds $1.2 million, the employer must commence remitting monthly instalments. Previously, employers were required to begin making monthly EHT instalments when their annual Ontario payroll exceeded $600,000. If an associated group of employers has cumulative payroll of more than $1 million, they must also file an Associated Employer Exemption Allocation Form.
The employer’s EHT payable is determined by multiplying the Ontario payroll for the year, after deducting the EHT tax exemption, by the applicable EHT rate. The Ontario EHT rate is based on the Ontario payroll of the employer before deducting any EHT exemption amount. The tax rate for a multiple account employer is based on the combined Ontario payroll of all the employer’s accounts.
The table below illustrates the new EHT regime and determines what is required of your business depending on payroll. If you have any questions regarding EHT rates, exemption amounts or the newly required instalment payments for employers with an annual Ontario payroll over $1.2 million, please reach out to a Bateman MacKay Business Advisor.
|Ontario Payroll (Total Remuneration)||Rate|
|Up to $200,000.00||0.98%|
|$200,000.01 to $230,000.00||1.101%|
|$230,000.01 to $260,000.00||1.223%|
|$260,000.01 to $290,000.00||1.344%|
|$290,000.01 to $320,000.00||1.465%|
|$320,000.01 to $350,000.00||1.586%|
|$350,000.01 to $380,000.00||1.708%|
|$380,000.01 to $400,000.00||1.829%|
An employer has a total annual Ontario payroll of $2 million, which results in an EHT rate equivalent to 1.95%. After the exemption amount, its total EHT taxable remuneration is $1 million so it would pay EHT equivalent to $19,500 [1.95% EHT rate x $1 million]. They would also have to begin making installment payments when their total payroll reached $1.2 million.
|Remuneration||Eligible Employer Action|
|Employer’s Annual total Ontario remuneration up to $1 million||No instalments and no annual return required|
|Employer’s Annual total Ontario remuneration from $1,000,000 to $1,200,000||No instalments Subtract available exemption amount from total Ontario remuneration to determine taxable remunerationAnnual return required by March 15 of following year*Associated groups of employers must file an Associated Employer Exemption Allocation Form|
|Employer’s Annual total Ontario remuneration over $1,200,000||Subtract available exemption amount from total Ontario remuneration to determine taxable remunerationMonthly instalments required by the 15th of the following monthAnnual return required by March 15 of the following year*Associated groups of employers must file an Associated Employer Exemption Allocation Form|
|Ontario remuneration paid Once-a-year|
|If you are not associated and are a Special filer with remuneration expected to be under $1M annually, please contact the ministry to update your account.|
If you are not associated and are a Special filer with remuneration expected to be over $1M annually Subtract available exemption amount from total Ontario remuneration to determine taxable remuneration (note 2)Special return required by the 15th of the following month. If you are associated and a Special filer with any level of remuneration Special return required by the 15th of the following month
Sign up for our newsletter and receive tax, accounting, and COVID-19 resources for your business!