Ontario Employer Health Tax: The $1 Million Exemption Explained

Last updated October 9, 2026

Many Ontario employers ask whether they owe the Employer Health Tax (EHT). Most small employers pay none because of the exemption, but there are rules. This page summarises the province's own pages: Employer Health Tax (EHT) (updated September 18, 2026) and Tax exemption (updated May 22, 2026). Confirm there, because rules change. This is general information, not tax advice.

What EHT is

A payroll tax on remuneration: salaries, wages, bonuses, taxable benefits, stock options and similar.

The exemption

The exemption is $1 million of Ontario remuneration a year (it was $490,000 before the increase to $1 million, which became permanent in 2021). The province's pages say it is scheduled for an inflation adjustment on January 1, 2029. If your Ontario payroll is under the exemption and you are an eligible employer, you do not pay EHT. If payroll exceeds it, you pay on the part above it. The province's own example: with $1.8 million of payroll you claim the exemption on the first $1 million and pay on the remaining $800,000.

Who can claim it

• Generally private-sector employers, certain Crown corporations, and organisations that receive government funding without government control.
• Not public-sector employers, universities, colleges, school boards or hospitals.
• Employers with more than $5 million of annual Ontario payroll cannot claim the exemption, except registered charities, which still can.

Associated employers

Only one exemption is available to a group of associated employers. If their combined payroll goes over $5 million, the group cannot claim it. If you own more than one business, check whether they count as associated before you assume each gets its own exemption.

Do you have to register or file?

Per the province's page, registration is required if you are not eligible for the exemption or your payroll exceeds your allowable exemption. The annual return is due March 15. Monthly instalments are required when your Ontario remuneration exceeds $1.2 million (from 2021 onward); below that, an annual return is enough.

Hiring? Training?

If you are growing payroll, see how the Ontario Job Grant can offset training costs, and use the free calculator to size it. For HST, see the $30,000 rule.

Not tax or legal advice. K.M.E. Incorporated is independent and not affiliated with the Government of Ontario.

KAE MOB ENTERTAINMENT INC., operating as K.M.E. Incorporated · Ontario corporation · CRA business number 753923143RC0001 · Mailing address: 22 John St, Toronto, ON M9N 2B3, Canada · Email: kmeinchq@gmail.com