Tax break coming in 2022 for small business property owners

·2 min read
In its budget earlier this year, the provincial government allowed Ontario municipalities to give small businesses a tax break. (Justin Tang/The Canadian Press - image credit)
In its budget earlier this year, the provincial government allowed Ontario municipalities to give small businesses a tax break. (Justin Tang/The Canadian Press - image credit)

Owners of Ottawa properties that house small businesses can soon expect a 15 per cent tax break that could save them thousands of dollars.

The City of Ottawa's finance and economic development committee approved a new tax category on Tuesday afternoon that would launch in 2022.

This means the owner of any commercial and industrial property measuring 25,000 square feet or smaller will be automatically eligible for the discount. Property owners do not need to apply.

The tax discount will be implemented over two years, starting with a 7.5 per cent discount applied to the final 2022 tax bill for everyone who qualifies. The remaining 7.5 per cent cut will be applied in 2023.

City staff settled on property size to determine what constitutes a small business, instead of factors such as revenue or number of employees, because the information is already readily available.

The discount will also apply to the eligible portion of a mixed-use property. Take, for example, a main street building that houses a retail store on the ground level, with residential units above. The new tax break will apply to the part of the property that is classified as commercial.

The new "small business tax subclass" must still be approved by full city council, which is expected to happen at next week's meeting on Oct. 13.

City of Ottawa presentation
City of Ottawa presentation

Tax break could remove nearly $10M in revenue

More than half of the 11,000 commercial and industrial properties in Ottawa will qualify for the new tax class, staff say, and that could lead to an estimated $9.9 million in revenue loss for the city.

That revenue loss will be made up in two ways, according to staff.

First, the city will cancel the discount for vacant properties, which would bring in $1.4 million. Until now, owners of vacant commercial property received a 30 per cent tax discount, while owners of empty industrial property received a 35 per cent break.

The remaining lost tax revenue will be borne by owners of larger properties who do not qualify for the new tax bracket. The city estimates these owners will see their taxes increase by an average of 1.46 per cent due solely to this tax change.

That does not include annual property tax increases that occur with each annual budget.

In the last provincial budget tabled in the spring, the Ontario government allowed municipalities to create a new tax subclass for small business property owners so they could be charged a lower rate than their larger counterparts. The move to help small businesses was spurred by the pandemic, but the new tax class will be permanent.

Although some small business owners also own the properties where they rent, many others are tenants. The property tax savings don't necessarily flow through to the person running the actual business.

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