CFIB asks Ontario to raise small business tax threshold to $700,000 from $500,000

The Canadian Federation of Independent Business wants Ontario to raise the income threshold for the small business tax rate to at least $700,000 from $500,000 and index it to inflation annually, the first of five priorities it released on Oct. 27 as the legislature opened its fall session. The federation said the change would help around 23,000 small businesses, with savings of up to $18,600 a year per business.¹

Eligible small businesses pay the 2.2 per cent small business tax rate on active business income up to the threshold and the general corporate income tax rate of 11.5 per cent above it, according to the CFIB. Had the threshold been indexed to inflation since it was last increased in 2007, the federation said, it would now stand at around $752,000.¹

Angela Drennan, CFIB's Ontario vice-president of legislative affairs, said members surveyed in August reported needing more direct support to navigate recent 50 per cent U.S. tariffs, persistent low demand and rising costs. Drennan said members appreciated the government's permanent reduction of the small business tax rate to 2.2 per cent from 3.2 per cent announced in the last budget, and that their top ask is now a higher threshold so they can pay the lower rate on more income.¹

Payroll taxes rank next. The CFIB is asking the province to secure another round of Workplace Safety and Insurance Board surplus rebates and to lower WSIB premiums, and to raise the Employer Health Tax exemption threshold to $2.25 million from $1 million and index it to inflation annually instead of every five years.¹

The WSIB's target funding range is 110 per cent to 120 per cent, and it has a policy to avoid falling below 110 per cent. According to the latest public data cited by the CFIB, the board's funding level was 117.1 per cent with a surplus of $6.13 billion for the fourth quarter of 2025. The WSIB is funded entirely by employer-paid premiums and the investment earnings those premiums make possible.¹

The Ontario government announced another reduction to the WSIB's average premium rate on Oct. 22, taking effect Jan. 1, 2027, the federation said. Julie Kwiecinski, CFIB's Ontario director of provincial affairs, said the board's funding level is high enough to withstand another distribution of surplus rebates as tariff relief to the premium-paying businesses that fund it.¹

The EHT threshold was last increased in 2020, when the province temporarily raised it to $1 million from $490,000 as a COVID relief measure, and the increase was made permanent in 2021, according to the CFIB. The next inflationary adjustment is set for Jan. 1, 2029.¹

The remaining priorities are continued elimination of provincial red tape, so that burden reduction on interprovincial trade and permitting is felt by small businesses, and an increase to the tiered pricing plan threshold for small business electricity customers, now at 750 kilowatt-hours per month. The CFIB said more detail on the electricity ask will come in an upcoming energy report, and that it will press the government on the recommendations this fall and into the new year.¹