Ontario’s Employer Health Tax is a payroll tax that generally kicks in after an organization’s payroll exceeds a certain amount. In practice, this works as an exemption from the tax on the first $450,000 of the organization’s payroll.
Not every employer can benefit from this exemption, since it is intended to provide tax relief only to certain kinds of organizations. However, not only can registered charities claim the Employer Health Tax exemption,[1] they also benefit from other special Employer Health Tax rules. For example, unlike other employers, registered charities may claim the exemption even if their payroll exceeds $5 million.
As of January 1, 2017, the Employer Health Tax rules specific to charities have undergone a significant change that will benefit certain charities with multiple locations: If a registered charity has more than one “qualifying campus”, it can claim an Employer Health Tax exemption amount for each one of them separately.
Campus in this sense just means any location of the charity. A “qualifying campus” is any location that:
- is public advertised (except for certain sensitive locations such as emergency shelters);
- has been appropriately registered with the Ontario Ministry of Finance;
is a permanent establishment in Ontario; - the charity has the exclusive right to occupy at all times; and
- is in fact used and occupied solely by the charity at all times, for the purpose of carrying out its charitable activities.
A registered charity with more than one location that has significant payroll expenses may benefit quite a bit from the expanded exemption that comes from being able to claim each location separately. Examples might include daycares, group homes, and residential support homes.
However, any single contiguous property only counts as one “campus”. So, for example, multiple locations within one building form only a single campus, as do several buildings on a single piece of land or on a series of touching pieces of land. Additionally, certain types of internal divisions of a charity (such as various parishes that are all under the umbrella of the same registered charity) do not count as multiple campuses.
The maximum exemption amount that can be claimed for each qualifying campus is the lesser of either (A) the payroll of all the employees who report to work at that campus, or (B) the $450,000 exemption amount.
Please note that this article is merely a summary, and does not necessarily include all the relevant details needed to make a determination of eligibility.
By: Alexandra Tzannidakis
[1] In order to claim the exemption, an organization (including a charity) must be an “eligible employer” as defined in the Employer Health Tax Act of Ontario.
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