HST is Coming!

Apr 01, 2010

By Susan Irwin, Executive Director / Lawyer, Rural Legal Services

Ontarians will begin paying the new Harmonized Sales Tax on July 1st, 2010. It combines the existing sales taxes, the GST (a federal tax of 5%) and the PST (a provincial tax of 8%) into one 13% sales tax.

While politicians and accountants have already discussed, and will no doubt continue to discuss, the good and bad of this new tax, the focus of this column is to encourage low income individuals and families to file an income tax return this year in order to take advantage of the higher tax credits and lower tax rates intended to help offset the extra expense associated with this new tax.

The Harmonized Sales Tax (HST) extends to goods and services that we didn’t have to pay PST on in the past, such as heating fuels and certain kinds of services.

According to the provincial government, it is making changes to the tax system to help people deal with the extra expenses that will result from the implementation of the HST. The catch is that you cannot take advantage of the new tax credits unless you file an income tax return.

People on social assistance and other low-income earners who have not bothered to file a tax return in the past, simply because no tax was payable, will lose out unless they start filing. The HST will, quite simply, hurt people who do not file income tax returns to take advantage of the new tax credits and income tax reductions.

Without going into all the details of the new tax credits and reductions, there are two items that are probably of immediate importance to low-to middle income earners. Starting with the 2010 taxation year, Ontario’s combined Property and Sales Tax Credit will be replaced with two separate and enhanced credits for property and sales tax respectively. The new Ontario Sales Tax Credit is the first item of immediate importance for low-to middle income individuals and families as it will provide advance payments to these individuals and families starting in August 2010. To be eligible you must file a 2009 income tax return and apply for the Goods and Services Tax/Harmonized Sales Tax (GST/HST) credit in your return.

The credit will be a maximum of $260.00 per year, per adult and child, although the amount begins to be reduced once an individual’s net income exceeds $20,000.00, or $25,000.00 for families. This new credit will be paid four times a year and will be issued separately from the GST/HST credit payment. However, like the GST credit payment, Ontario’s Sales Tax Credit will be considered “exempt income” that is not deductible from Ontario Works or Ontario Disability Support Program payments.

The second key reason to file is the “transitional benefit” that the provincial government will pay to people to help offset the immediate impact of the HST. The maximum benefit will be $300.00 for a single person or $1,000.00 for single parents or couples. This benefit will be paid in three installments, beginning in August 2010, and is a one time deal – it will not be a permanent benefit. Again, this benefit is also considered “exempt income” for people on social assistance.

If you are on social assistance, or a low-to middle income earner, and you have not filed tax returns in the past, this would be a good year to start! Most people on social assistance will qualify for the maximum amounts (or close to the maximum amounts) of the sales tax credit and the transitional benefit and the amount of money involved is significant.

Income tax forms are available at the Post Office or online at http://www.cra-arc.gc.ca/E/pbg/tf/5006-r/README.html . If you require help in completing the forms, and your income is not more than $29,000.00, volunteers with Northern Frontenac Community Services will prepare your return without charge: call 613-279-3151. A similar program is available for residents of northern Lennox & Addington through Land o’ Lakes Community Services: call 613-336-8934.

Legalese is a column of general information and opinion on legal topics by the lawyers of Rural Legal Services, Box 359, Sharbot Lake, ON, K0H2P0, 613-279-3252, or 1-888-777-8916. This column is not intended to provide legal advice. You should contact a lawyer to determine your legal rights and obligations.