In its 2016 Ontario Economic Outlook and Fiscal Review, released on November 14, the Government of Ontario has proposed a number of significant changes to the Province's Land Transfer Tax (LTT) regime. By way of background, the LTT is payable on the purchase of any land or any interest in land and is generally calculated on the basis of the purchase price.
Specifically, the Government is proposing to:
- Update LTT rates and brackets;
- Enhance support for first-time homebuyers; and
- Restrict the refund for first-time homebuyers to Canadian citizens and permanent residents.
Increases to LTT rates and brackets
Under the proposal, LTT rates will increase effective January 1, 2017. This is being done by adding additional brackets for high-value transactions. In the case of the purchase of any type of land other than residential - including commercial, industrial, multi-unit residential and agricultural properties - there will be a new bracket for purchases exceeding $400,000. The LTT rate for any part of the purchase price above that threshold will be 2%. In the case of purchases of land with one or two single family residences, the changes create a new bracket for purchases exceeding $2,000,000. The LTT rate for any part of the purchase price above that threshold will be 2.5%.
The changes are highlighted in the following tables, the first of which applies to all land other than to the specific case of land with one or two single family residences, to which the second table applies:
| Commercial, industrial, multi-unit residential and agricultural land | ||
| Portion of Purchase Price |
Current LTT Rate | Proposed LTT Rate as of Jan. 1, 2017 |
| Up to and including $55,000 | 0.5% | 0.5% |
| Above $55,000, up to $250,000 |
1.0% | 1.0% |
| Above $250,000, up to $400,000 |
1.5% | 1.5% |
| Above $400,000 (new bracket) |
1.5% | 2.0% |
| Land with one or two single family residences | ||
| Portion of Purchase Price |
Current LTT Rate | Proposed LTT Rate as of Jan. 1, 2017 |
| Up to and including $55,000 | 0.5% | 0.5% |
| Above $55,000, up to $250,000 |
1.0% | 1.0% |
| Above $250,000, up to $400,000 |
1.5% | 1.5% |
| Above $400,000, up to $2,000,000 |
2.0% | 2.0% |
| Above $2,000,000 (new bracket) |
2.0% | 2.5% |
Doubled maximum tax rebate for first-time homebuyers
The increases described above are intended to fund a corresponding increase in the maximum LTT rebate for first-time homebuyers. Under the proposal, the maximum rebate for such buyers will be doubled from $2,000 to $4,000 as of January 1, 2017. Under the current regime, the $2,000 rebate effectively cancels out the LTT that first-time buyers would otherwise have paid on the first $227,500 of the purchase price. With the proposed changes, the LTT-free (after rebate) portion of the purchase price would rise to $368,000. The province has stated that this means that more than half of first-time homebuyers would pay no provincial LTT. However, the City of Toronto imposes its own Municipal Land Transfer Tax in addition to the LTT if the relevant land is located in Toronto.
Restricting the LTT refund to Canadian citizens and permanent residents
Currently, purchasers can access the first-time homebuyers' refund regardless of citizenship or residency status. The Government is proposing to change this by restricting eligibility for the refund to Canadian citizens and permanent residents, effective January 1, 2017.
The Government has stated that purchasers who entered into agreements of purchase and sale on or before November 14, 2016 will remain eligible for the refund, regardless of citizenship or residency status. However, after that point, purchasers who are not Canadian citizens or residents will no longer be eligible, with the important caveat that they can apply for the refund retroactively if they satisfy the eligibility requirements within 18 months.
Additional changes
Two additional changes proposed by the Ontario government are as follows:
- Amending the Land Transfer Tax Act to permit the collection of certain additional information about properties and purchasers, including information about the type of property, its occupancy as principal residence or rental property, and residency and the citizenship/permanent resident status of the purchaser.
- The Government will explore altering the basis of the LTT calculation from the value of the purchase price to the fair market value of the property transferred, which is the approach used in most other provinces.
We will continue to follow these proposals as the Ontario government moves to further amend the LTT.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
