EHT (Employer Health Tax) Update

EHT (Employer Health Tax) Update

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On November 5, 2020, the Ontario Government proposed changes to the existing EHT rules. The proposed changes are noted below.

In March 2020, the EHT exemption for private sector employers with total annual remuneration less than $5,000,000 was temporarily increased from $490,000 to $1,000,000 in efforts to assist small businesses.

The November 5, 2020 budget proposes to:

  • Make this $1,000,000 EHT exemption permanent;
  • Increase the threshold payroll amount beyond which employers are required to pay EHT instalments from $600,000 to $1,200,000; and
  • Push the next scheduled inflationary adjustment to the EHT exemption from 2024 to 2029.

Example – exemption changes:

An employer with a payroll of $700,000 would have owed $4,095 in EHT with the $490,000 exemption in effect in 2019 (($700,000 – $490,000) x 1.95%). As the exemption is now $1,000,000 this means that this employer would owe no EHT on the same payroll in each of 2020 and 2021. The employer would continue to owe no EHT going forward until its annual payroll exceeds $1,000,000.

Example – instalment changes:

Assume an employer has annual payroll of $1,000,000; previously, this employer would be required to remit EHT instalments once their payroll exceeded the $600,000 threshold for the year. Under the proposed changes EHT remittances will not be required in the year until payroll exceeds $1,200,000.

More Information about the program: