Bill 85 is an omnibus budget implementation statute that amends a wide set of Ontario laws to give effect to 2023 budget measures. It mixes technical fixes (language and standards updates), tax-rule changes (fuel, gasoline, liquor, tobacco and corporate tax rules), targeted incentives, and administrative powers for revenue collection and regulatory rulemaking.
The package matters because it creates a new provincially administered manufacturing investment tax credit, changes how several fuel and gasoline taxes are applied and assessed, adjusts the guaranteed annual income payment formula and indexing, and grants new information‑sharing and rule‑making authorities to provincial regulators. These changes will affect corporate tax planning, tax compliance and assessments, municipal public-transportation funding calculations, and the administration of certain social benefits.
At a Glance
What It Does
Implements a set of budget measures by amending multiple statutes: it updates tax definitions and assessment mechanics, establishes an Ontario-made manufacturing investment tax credit, modifies benefit calculation and indexing for the Guaranteed Annual Income program, and creates new administrative authorities for revenue and regulatory bodies.
Who It Affects
Provincial treasury and tax administrators, Canadian-controlled private corporations with Ontario operations, interjurisdictional carriers and fuel suppliers, makers and sellers of wine and beer, regulated financial authorities and credentialing bodies, and recipients of the provincial guaranteed annual income.
Why It Matters
The bill changes incentives (a capital investment tax credit), assessment levers (deeming rules for carriers and expanded data access), and benefit generosity (indexing and taper adjustments). For finance and compliance teams these are operational changes that require system updates, new documentation and revised forecast assumptions.
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What This Bill Actually Does
Bill 85 is not a single-policy bill; it is a consolidation of Budget 2023 measures implemented as schedules that amend a broad range of Ontario statutes. Several schedules are technical—updating standards references, cleaning up French-language provisions and removing obsolete permit requirements—but the Act also contains discrete policy moves that change tax liabilities, credit availability and benefit calculations.
A central fiscal measure is the creation of an Ontario made manufacturing investment tax credit. The credit targets qualifying Canadian-controlled private corporations that make capital expenditures on eligible property used in Ontario manufacturing and processing; it is calculated at a fixed percentage of eligible expenditures and includes rules for associated corporations and designation agreements that cap group entitlements.
The Taxation Act changes also adjust the small business deduction phase-out for larger capitalized corporations and make a mix of retroactive conformity changes to prior tax years.The Act alters fuel and gasoline taxation mechanics: it amends statutory definitions to treat hydrogen separately from gasoline, adds a zero tax rate for hydrogen used by interjurisdictional carriers to power qualified motor vehicles, and strengthens the Minister’s assessment tools by increasing the deemed kilometres-per-litre factors or permitting a 20% reduction to reported fuel efficiency when accounting records are inadequate. There are also penalties extended to unregistered importers/exporters of aviation fuel and propane.
Separately, the Dedicated Funding for Public Transportation Act is amended so the formula for the portion of gasoline tax dedicated to municipal transit uses the actual tax rate in force for a fiscal year and includes a method to calculate litres when multiple rates apply within a year.Social and regulatory changes are included as well. The Ontario Guaranteed Annual Income Act’s incremental benefit taper is halved (making the program less aggressive in clawing back benefits) and the increment’s maximum is set to be indexed to a provincial cost-of-living measure starting July 2024.
The Ministry of Revenue is empowered to gather vessel and aircraft information from Transport Canada for tax administration and policy work, subject to a public notice requirement describing the collection. The Insurance Act and Financial Professionals Title Protection Act receive targeted rulemaking authorities for regulators to define individual variable insurance contracts and to govern use of protected professional titles in certain transitional or revocation scenarios.
Finally, the Tobacco Tax Act is amended to repeal provisions relating to 'tear tape' and makes assorted French-language corrections; the Liquor Tax Act is reorganized to distinguish onsite and offsite winery retail stores and applies certain taxes retroactively to draft beer manufactured by beer manufacturers or affiliates.
The Five Things You Need to Know
The Ontario made manufacturing investment tax credit equals 10% of eligible qualifying expenditures subject to a $20 million per‑corporation cap (with allocation rules for associated groups).
For carriers with inadequate records, the Minister may deem interjurisdictional vehicles to have travelled 1.7 kilometres per litre or may reduce the carrier’s reported kilometres per litre by 20%, increasing assessed fuel tax.
Hydrogen used by an interjurisdictional carrier in Ontario to generate power in a qualified motor vehicle is subject to a tax rate of 0 cents per litre under the Gasoline Tax Act.
The Guaranteed Annual Income increment’s taper is cut in half (to $0.50 per $24/$48) for payments from July 2024 onward, and the maximum increment will be automatically indexed annually to an Ontario cost‑of‑living measure beginning with the fiscal year starting July 1, 2024.
Section changes to the Liquor Tax Act create distinct rules for onsite and offsite winery retail stores, including a single 12% basic tax rate for purchases from offsite winery retail stores and retroactive application of certain beer tax language to November 29, 2021.
Section-by-Section Breakdown
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Transit funding calculation anchored to actual gasoline tax rates
This schedule rewrites the formula that determines the portion of gasoline tax revenue dedicated to municipal transit. Instead of referencing a fixed clause in the Gasoline Tax Act, it instructs the calculation to use the tax rate that actually applied in each fiscal year and supplies a method for computing litres when more than one rate applied during a year. Practically, this increases transparency in the dedicated transfer calculation and avoids mismatches when tax rates change mid‑year.
Fuel and gasoline tax mechanics: hydrogen treatment, zero‑rate and tougher carrier assessments
These schedules separate hydrogen from the statutory definition of gasoline while explicitly including hydrogen as a 'fuel' for interjurisdictional agreement purposes. The Gasoline Tax Act adds a zero cent per litre tax rate for hydrogen when used by interjurisdictional carriers to generate power in qualified motor vehicles. Both Acts enlarge the Minister’s assessment powers: when carriers lack adequate books, the Minister can now deem fleet efficiency at 1.7 km/L or impose a 20% reduction to reported kilometres per litre (previously lower deemed rates applied). The legal effect is twofold: the province signals support for hydrogen fuel deployment for carriers while tightening enforcement levers to deter underreporting and non‑compliance.
Liquor Tax Act: onsite vs offsite winery retail store distinction and retroactive beer tax change
The schedule removes obsolete categories (authorized grocery store, wine boutique) and introduces 'onsite' and 'offsite' winery retail stores. It prescribes when basic, volume and environmental taxes apply and sets a flat 12% basic tax for wine or wine coolers sold from offsite winery retail stores that are manufactured by the store owner. Two amendments (to sections 23 and 24) are retroactively deemed to have taken effect on November 29, 2021 to clarify that certain volume and environmental taxes apply to draft beer manufactured by a beer manufacturer or its affiliates.
Ministry of Revenue access to Transport Canada vessel and aircraft data
New section 14.1 authorizes the Minister and designated public servants to collect vessel and aircraft information from Transport Canada for tax administration, enforcement and policy development. The Minister must publish a notice describing the legal authority, types and sources of personal information collected, purposes, potential linkages and a contact point. The provision overrides conflicting statutes and creates a formal transparency step but does not set out limits on retention, disclosure or safeguards beyond the notice requirement.
Guaranteed Annual Income: tapered reduction halved and automatic cost‑of‑living indexing
The Act halves the amount by which monthly benefits are reduced for income above thresholds—from $1.00 to $0.50 for each full $24/$48 depending on circumstance—for payments starting July 2024. It also adds an indexing mechanism for the increment’s maximum tied to an Ontario Consumer Price Index measure published by Statistics Canada, with precise formulae for annual adjustments and rounding rules. The effect is to increase net benefits for recipients over time and to insulate the maximum increment from inflation.
Taxation Act: manufacturing investment tax credit and other corporate tax adjustments
This schedule creates section 97.2, the Ontario made manufacturing investment tax credit. The credit equals 10% applied to eligible expenditures (subject to a $20 million cap per qualifying corporation, with group allocation and anti‑avoidance rules). The schedule includes definitions of eligible property, associated corporation rules, filing and designation requirements, and a mandatory review of the credit’s effectiveness every three years. The schedule also reforms the small business deduction phase‑out rules for taxation years beginning on or after April 7, 2022 and makes several retroactive amendments affecting tuition credits and OHIP‑related computations.
Regulatory rule‑making: titles and insurance product definitions
Amendments allow the Financial Professionals Title Protection Authority to make rules about protected title use when an approved credentialing body’s approval is revoked or the body ceases to operate, and remove one subclause of the prior text. The Insurance Act grants the Financial Services Regulatory Authority explicit rule‑making authority to define what constitutes an individual variable insurance contract. These changes give regulators discretionary power to prescribe definitions and transitional governance in areas affecting credentialing and product eligibility.
Tobacco Tax Act: repeal of tear tape regime and French-language corrections
The schedule repeals the provisions governing 'tear tape' and the requirement for tear tape manufacturers to hold permits, and applies a suite of consequential deletions and French‑language terminology fixes across the Act. The removal of the tear tape framework eliminates a previously regulated product category and associated permitting obligations.
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Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Qualified manufacturers (CCPCs) that invest in eligible Ontario manufacturing property — they gain a refundable or non‑refundable tax benefit equal to 10% of qualifying expenditures (subject to caps and allocation rules), improving the after‑tax return on capital projects.
- Interjurisdictional carriers that use hydrogen — hydrogen used to generate power in qualified vehicles is zero‑rated for provincial gasoline tax, lowering operating tax costs for early hydrogen adopters engaged in interprovincial transport.
- Guaranteed Annual Income recipients — starting July 2024 the benefit clawback rate is reduced and the program’s maximum increment will be indexed to provincial CPI, increasing effective benefit levels and protecting purchasing power.
- Municipalities and transit planners — the transit‑dedicated funding formula is tied explicitly to the actual gasoline tax rate in force and supplies a method to calculate litres when rates change mid‑year, clarifying the revenue base used for grants.
- Regulators (FSRA and the Title Protection Authority) — they receive clearer statutory authority to issue rules on insurance product definitions and protected titles, enabling faster administrative responses and standardized rules.
Who Bears the Cost
- Provincial finance and tax administration — new credits, indexing obligations and revised assessment practices will increase complexity in processing, forecasting and auditing, and the province must fund the manufacturing credit and higher benefit payments.
- Interjurisdictional carriers with poor recordkeeping — the stronger deeming rules (1.7 km/L or 20% reduction) raise the tax risk and potential liabilities if carriers cannot substantiate fuel use and kilometres.
- Businesses in groups that seek to claim the manufacturing credit — associated‑corporation rules, designation filing requirements and anti‑avoidance deeming can limit per‑entity credit access and force restructuring or documentation costs.
- Beer manufacturers and affiliates — the retroactive clarification that certain draft beer taxes apply to draft beer manufactured by a manufacturer or affiliates could create past tax exposure and compliance burdens for affected producers.
- Transport Canada and operational teams — the Ministry of Revenue’s new entitlement to vessel and aircraft data increases demands for data transfers, reconciling privacy safeguards and administrative workflows for sharing federal information.
Key Issues
The Core Tension
The bill seeks to stimulate investment and cleaner fuels while simultaneously strengthening enforcement and expanding data collection; those objectives pull in different directions because aggressive compliance levers and broad data access can discourage adoption and impose compliance costs that reduce the net attractiveness of the incentives.
The Act mixes forward‑looking incentives with stronger administrative enforcement; that combination creates practical implementation trade‑offs. The manufacturing investment tax credit targets capital formation but embeds group caps, designation filings and anti‑avoidance deeming which will require significant guidance and compliance processes; the net takeup depends on the clarity of regulations, safe‑harbours and the administrative burden of designation agreements.
The provision for a mandatory review every three years creates accountability, but the initial draft leaves many operational details (eligibility of leases, prescribed property categories, and interaction with federal assistance rules) to regulation.
On fuel taxation the government both incentivizes hydrogen (a zero rate for certain carrier uses) and tightens audit levers (higher deemed km/L and a 20% reduction to reported efficiency). That is a policy tension: the adoption incentive for low‑carbon fuel could be undermined if carriers fear aggressive assessments when records are imperfect.
Similarly, the Ministry’s new power to collect vessel and aircraft data from Transport Canada is broad and allows cross‑referencing for tax enforcement and policy analysis, but the statute contains only a notice requirement for personal information rather than explicit privacy, retention, or third‑party disclosure limits — raising implementation questions about safeguards and intergovernmental data governance.
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