If you run your own small business or are self-employed, drive for a ride-share service, do freelance work, or sell products online. You might wonder whether it is still available Ontario Works for self-employed. The answer is yes. But the rules of OW for self-employed people are different from those for regular employees.
Ontario Works considers self-employed income separately from employment earnings. You are allowed to deduct approved business expenses before your income is counted. Then, the same generous earnings exemptions apply for Ontario Works for the self-employed. This article explains exactly what income is counted, what expenses you can deduct, and how to stay eligible while running your business.
Who Is Considered Self-Employed by OW?
Ontario Works Self-employment is defined by the activity of operating and controlling a business, either directly or indirectly. You must not be employed in another organization. Your caseworker will look at several factors to decide whether your income comes from self-employment or regular employment. These factors include:
- Whether you own and operate the business
- Suffer the financial losses
- Benefit from the profits
- Own the tools and business assets
- Paid based on completing a specific contract.
If you are considered self-employed on your tax returns by the Canada Revenue Agency, that is strong evidence. A person is not self-employed if they are an employee in another organization. The terms and conditions of your work arrangement will be examined carefully.
What Is Counted in Self-Employed Income?
Your net business income, which is your gross income from your business minus approved business expenses, is counted as income by Ontario Works for the self-employed. You are not taxed on your total revenue. You are only assessed on your profit. Revenue or business income means the cash coming into your business. This includes:
- Payments from customers
- Payment from clients or platforms.
Proceeds from business loans are not considered revenue. Money you invest from your personal savings into your business is also not considered revenue. Only the actual cash earned from business activities counts as gross income.
Once your gross income is calculated, you subtract approved business expenses to arrive at your net business income. That net amount is what Ontario Works uses to determine how your financial assistance will be affected.
Ontario Works for Self-Employed: Earnings Exemption
Consistent with the treatment of employment earnings, self-employed individuals on Ontario Works are eligible for earnings exemptions. However, there is an important time-period rule.
The earnings exemptions can only be applied after you have been receiving Ontario Works for 3 consecutive months. The exemptions are a $200 flat rate exemption plus a 50 percent partial exemption on earnings in excess of $200.
How Earning Exemption Works?
- Calculate your net business income by subtracting approved expenses from your gross income.
- Apply the $200 exemption from Ontario Works for the self-employed
- The first $200 of your net business income is fully exempt.
- Remaining amount above $200, 50 percent is also exempt.
- The other 50 percent is countable income and reduces your Ontario Works payment dollar for dollar.
There is an exception for re-applicants. If you left Ontario Works or ODSP with earnings from employment or a business, and you reapply within 6 months of exiting, the earnings exemptions apply immediately. You do not have to wait another three months.
Example
| Step | Calculation | Amount |
| Gross business income | $1,500 | |
| Approved business expenses | -$300 | |
| Net business income | $1,500 – $300 | $1,200 |
| First $200 exempt | $1,200 – $200 | $1,000 remaining |
| 50% of remaining exempt | $1,000 ÷ 2 | $500 exempt |
| Countable income | Remaining 50% | $500 |
| Maximum OW amount | $733 | |
| OW payment after deduction | $733 – $500 | $233 |
| Total monthly income | $1,200 business income + $233 OW | $1,433 |
What are Approved Business Expenses?
This is where many self-employed people make mistakes on Ontario Works. You cannot deduct all the expenses that income tax allows. OW has its own list of approved and non-approved expenses. Your caseworker will apply a reasonableness test to ensure that each expense is necessary for operating your business, maintains or increases your likelihood of earning income, and is purchased on a best buy basis. Approved business expenses depend on the business. Common examples include:
- Supplies
- Tools and equipment
- Bookkeeping and legal fees
- Advertising and business cards
- Rent for office
What are Non-Approved Business Expenses
According to the Rules of Ontario Works for Self-employed, some expenses that are allowed for income tax purposes are not allowed. You cannot deduct:
- Wages for employees
- Gifts and entertainment.
- Business losses
- Depreciation on business assets.
- Conferences.
If you claim these expenses, your caseworker will remove them from your calculation. Your net business income will be higher, which means more countable income and a lower OW payment.
The best practice is to keep clear records and discuss any questionable expenses with your caseworker before deducting it. Your caseworker can help you figure out which business expenses Ontario Works allows.
Business Assets and the Bank Balance Limit
On Ontario Works for self-employed, you can own business assets that are necessary for your operation. Business assets include items like equipment, furniture, and inventory. Tools of the trade are treated separately and have no value limit.
| Business Asset Rule | Limit / Treatment |
| Standard maximum value of business assets | $10,000 |
| Possible approved exemption | Up to $15,000 |
| Condition for higher exemption | Assets must be necessary for operating the business |
| Approval required | Yes, from your caseworker |
- The cash portion of your business assets cannot exceed $3,000.
- Cash means money earned and saved from the business that you keep in a business bank account.
- This limit excludes amounts that have been approved for reinvestment.
- If you are saving up to buy new equipment, you can request approval to accumulate more cash for that specific purpose.
How Business Loans are treated for Self-employed on OW
Business loans taken by self-employed or businessmen are treated favourably under Ontario Works. Loans for the purpose of operating a business are exempt from income and assets. However, you must obtain prior approval from your caseworker.
To get approval, you submit a Request for Approval Business Loan Expense form. This form verifies the purpose of the loan. Once approved, the loan proceeds do not count as income in the month you receive them, nor do they count as an asset in the following months.
This is a significant benefit for self-employed people who need to borrow money to buy inventory, equipment, or cover startup costs.
Business Reinvestments & Saving for Business
Self-employed on Ontario Works may request approval to collect business income for the reinvestment. This means you can set aside money from your business profits to buy something you need for the business later.
The amount of business income you save monthly may be considered an allowable business expense. This reduces your net business income in the months you are saving. However, you must not exceed the allowable business asset levels when accumulating savings for reinvestment.
Example
| Situation | Treatment |
| Saving $500 per month for a new business computer | May be treated as a business expense |
| Effect on OW | Lowers net business income, reducing countable income and increasing OW payment |
| Savings limit without approval | Cash business assets cannot exceed $3,000 |
| If savings exceed $3,000 | Specific approval is required for a larger reinvestment goal |
Self-Employment as an Approved Employment Activity
If you want self-employment to count as your main employment assistance activity, you need approval from your caseworker. Not every self-employment activity will be approved.
Your caseworker will assess your potential to successfully achieve financial independence from social assistance. There are 4 steps to determine whether self-employment is approved.
- You may be referred to a Self-Employment Development Agency for help with business planning, record keeping, and mentoring.
- You may also be eligible for employment and participation benefits.
- These benefits can help with costs associated with your business, such as transportation, tools, or training.
- You may also qualify for advance child care payments to help cover care costs while you work on your business.
Not Approved Self-Employment Ventures The
Rule of Ontario Works for Self-employed says that you are still allowed to run a business even if it is not approved as your main employment assistance activity. The rules are different in this situation.
- You must be eligible completely for Ontario Works, including residency, income, and asset rules, and participation needs.
- Any time you spend on your self-employment cannot interfere with your approved participation requirements.
- If your caseworker requires you to attend job search programs, your business activities cannot conflict with those obligations.
The income from non-approved self-employment is still subject to the regular self-employment business income, expense, and asset rules. The earnings exemptions still apply. You simply cannot count your business time as your primary participation activity.
Casual Employment vs. Self-Employment
Some people do occasional casual work that is not quite self-employment, according to Ontario Works, and not quite regular employment. Examples include shovelling snow, babysitting, or small earning tasks.
Income from casual or occasional work is treated as income, and the earnings exemptions may apply. However, you would not be eligible to deduct business expenses from this income. You simply report your gross income. Your caseworker will apply the $200 plus 50 percent exemption to that gross amount.
If your casual work grows into a more formal business, you should speak with your caseworker about whether you should be reclassified as self-employed. That would allow you to start deducting approved business expenses.
Situation of Business Losses
If your business expenses exceed your gross income in a particular month, you have a business loss. Under Ontario Works for Self-employed rules, business losses are not an approved expense. You cannot deduct a loss to reduce your other income or to increase your OW payment.
In a business loss month, your net business income is simply zero. You do not get to claim a negative amount. You report zero income from self-employment for that month. Your Ontario Works payment would be the full amount for your benefit unit, assuming you have no other income.
However, you should still report your business activities to your caseworker. If you are consistently losing money, your caseworker may question whether your self-employment is a viable activity. You may be asked to adjust your business plan or seek other employment.
Summary
Ontario Works for Self-employed people is absolutely possible, but your net business income is what counts. That is your gross income minus approved business expenses. After 3 continuous months on OW, the first $200 of your net business income is fully exempt. The remaining half is also exempt. You keep most of your profit, and Ontario Works tops up the rest. Reading more and more documents can be overwhelming for Ontario Works recipients, while the OW Eligibility Check Tool has made it so simple with a few clicks.
You must keep and provide proper records of all income and expenses to your case worker. You cannot claim all expenses that income tax allows. Business assets cannot exceed $10,000 (or $15,000 with approval), and business cash cannot exceed $3,000 without approval for reinvestment. Business loans are exempt if pre-approved.
If you run a small business, freelance, or do gig work, you are not alone. Many self-employed people use Ontario Works as a bridge to financial independence. The rules are fair and designed to help you succeed.
Frequently Asked Questions
1. How does Ontario Works define self-employment?
You are self-employed if you operate and control a business, directly or indirectly. Factors include owning the business, suffering losses, benefiting from profits, owning tools and assets, and being considered self-employed on your tax returns by the Canada Revenue Agency.
2. What income is counted for a self-employed person on OW?
Your net business income is counted. That is your gross business income minus approved business expenses. You are not assessed on your total revenue, only on your profit after allowable deductions.
3. Do the earnings exemptions apply to self-employment income?
Yes. After three continuous months on OW, the first $200 of your net business income is fully exempt. Of the amount above $200, 50% is also exempt. The other 50% reduces your OW payment.
4. What business expenses can I deduct?
Approved expenses include supplies, tools and equipment, bookkeeping and legal fees, advertising, business cards, and rent for a separate business location (not your home). CPP and EI special benefit contributions are also deductible.
5. What business expenses cannot be deducted?
You cannot deduct wages for employees, gifts and entertainment, business losses, depreciation on business assets, or conferences. These are not allowed under Ontario Works even if they are allowed for income tax purposes.
6. Is there a limit on business assets I can own?
Yes. Business assets necessary for your operation are exempt up to $10,000. Your caseworker may approve an exemption up to $15,000 if needed. The cash portion kept in a business bank account cannot exceed $3,000 without approval for reinvestment.
7. Are business loans counted as income or assets?
No. Business loans are exempt as income and assets, but you must obtain prior approval from your caseworker using the Request for Approval Business Loan Expense form. Without approval, the loan may be counted.
8. What if I want to save money to reinvest in my business?
You may request approval to accumulate business income for reinvestment. The amount saved monthly may be treated as an allowable expense. However, you must not exceed the allowable business asset levels, and the cash limit of $3,000 applies unless you have specific approval.
9. What happens if my business loses money in a month?
Business losses are not an approved expense. Your net business income is simply zero for that month. You cannot deduct a loss to reduce other income or increase your OW payment. You still report your activities to your caseworker.
10. Do I need to keep records of my business income and expenses?
Yes. You are required to maintain adequate records of all income, expenses, assets, and liabilities. Your caseworker may ask to see them at any time. Random file reviews ensure that documentation is present and accurate.
