Frequently Asked Questions About Tax Exemption and Association
- If my payroll is below the exemption amount, do I still have to file an Annual Return?
- Who is an associated employer?
- What is the exemption amount and how is it calculated?
- Who is an eligible employer for the tax exemption?
If my payroll is below the exemption amount, do I still have to file an Annual Return?
No, an eligible employer whose payroll for the year does not exceed the exemption amount is not required to file an Annual Return. However, associated employers must file an Annual Return regardless of their annual Gross Total Ontario Remuneration amounts.
Who is an associated employer?
Associated employers are connected by ownership or by a combination of ownership and relationship of the owners, either through blood, marriage or adoption. The associated corporations rules under section 256 of the Income Tax Act (Canada) are used to determine whether employers are associated. Although these rules refer to corporations, their application is extended to include individuals, partnerships and trusts.
Please refer to Information Bulletin 1-98 Associated Employers.
What is the exemption amount and how is it calculated?
For 1999 and following years, eligible employers are exempt on the first $400,000 of payroll.
Eligible employers are not required to pay tax until their cumulative payroll exceeds the exemption for the year. Eligible employers who are associated may allocate the exemption to one member of the associated group or it may be shared among the associated employers.
Who is an eligible employer for the tax exemption?
In general, eligible employers for the tax exemption include:
- private sector employers
- organizations that received financial assistance from any level of government but are not under control of government, and
- Crown corporations subject to tax under Part 1 of the Income Tax Act (Canada).
Please refer to Information Bulletin 2-98 Tax Exemption.
