5 Changes to Ontario’s Land Transfer Tax

1.  Currently the maximum land transfer refund for first time buyers is $2,000. This means no transfer tax is payable on the first $227,500 of the purchase price of a home or value of consideration.

On January 1, 2017, the refund will increase to a maximum of $4,000.

According to the Ontario Government’s, a first time home buyer would pay no Land Transfer Tax on the first $368,000 of the value of consideration. Above $368,000, a qualifying first time buyer would receive the $4,000 maximum refund and would pay for tax beyond that amount.

2.  Currently, the top tax rate is 2% above $400,000 for one or two single family residences.

As of January 1, 2017, the tax rate increases to 2.5% but only on one or two single family homes above $2,000,000.

So this increase would not affect homes less than $2,000,000. 99% of single family homes purchased in 2015 were below that says Ontario.

The tax rate scale will be as follows:

  • 5% up to and including $55,000;
  • 1% above $55,000 and up to and including $250,000;
  • 1.5% above $250,000;
  • 2% above $400,000;
  • 2.5% above $2,000,000 for one or two single family residences.

Commercial, industrial, multi-residential and agricultural properties will go to 2% above $400,000 with no increase beyond.

3.  Currently all first time buyers are eligible for the refund, regardless of citizenship or residency status.

As of January 1, 2017, the refund will be restricted to Canadian Citizens and permanent residents.

Once a transaction closes, a buyer will have eighteen months to obtain citizenship or permanent resident status and apply for the refund.

4.  Currently the Land Transfer Affidavit includes the allocation of total consideration that includes cash paid, mortgage(s), value of chattels and among other things, the total value of consideration.

As of January 1, 2017 the Province will authorize the collection of additional prescribed information to include the following:

Intended use of the property, residency, citizenship and permanent resident status of the buyers, and type of property (such as residential, commercial, agricultural, industrial or recreational;

5.  Currently land transfer tax is based on the value of consideration; that is typically the purchase price of the property.

The Province will explore calculating LTT from value of consideration to fair market value of the property.

Most other provinces use fair market value for calculating LTT. The government posits that substituting fair market value “reduces opportunities for tax avoidance and promotes fairness.”