2016 Ontario Economic Outlook and Fiscal Review
Chapter V: A Fair and Sustainable Tax System

Section B: Modernizing Land Transfer Tax and Other Tax Measures

Land Transfer Tax

The Province is proposing to modernize Ontario’s Land Transfer Tax (LTT) system to reflect developments in the real estate market, by:

  • Enhancing support for first-time homebuyers;
  • Updating LTT rates and brackets; and
  • Restricting the refund for first-time homebuyers to Canadian citizens and permanent residents.

Doubling the Maximum Refund for First-Time Homebuyers

To help Ontarians buy their first home, the Province is proposing to double the maximum refund for first-time homebuyers from $2,000 to $4,000, effective January 1, 2017.

Currently, no LTT is payable on the first $227,500 of the value of consideration for a first home. The value of consideration for residential properties is typically the purchase price of the property and is the amount used for calculating LTT payable.

With the increased maximum, no LTT would be payable by qualifying purchasers on the first $368,000 of the value of consideration for eligible homes, an increase of over $140,000 from the current level. First-time purchasers of homes for greater than $368,000 would receive a maximum refund of $4,000. As a result of this change, it is estimated that more than half of first-time homebuyers would pay no LTT.

For example, a qualifying purchaser of a $350,000 home currently pays $1,725 in LTT (including the current maximum refund). Beginning January 1, 2017, this would decline to zero.

First-time purchasers of more expensive homes would also benefit from the enhanced refund. For example, a qualifying purchaser of a $600,000 home currently pays $6,475 in LTT (including the current maximum refund). Beginning January 1, 2017, this would decline to $4,475, a savings of $2,000.

Modernizing Land Transfer Tax Rates

The LTT is payable on the purchase of any land or any interest in land in Ontario. The LTT is normally based on the value of consideration, which is typically the amount paid for the land.

The current tax rates for LTT are:

  • 0.5 per cent up to and including $55,000;
  • 1 per cent above $55,000 up to and including $250,000;
  • 1.5 per cent above $250,000; and
  • 2 per cent above $400,000 where the land contains one or two single-family residences.

These rates and brackets have not changed since 1989. The Province is proposing to modernize LTT rates to reflect the current real estate market, effective January 1, 2017:

  • The tax rate on the portion of the value of consideration above $2,000,000 for purchases of one or two single-family residences would increase from 2 per cent to 2.5 per cent. “Single-family residences” include, for example, detached and semi-detached homes, townhomes and condominiums.
  • The tax rate on the portion of the value of consideration above $400,000 for purchasers of all other types of property would increase from 1.5 per cent to 2 per cent. “All other types of property” include, for example, commercial, industrial, multi-residential and agricultural properties.

As a transitional measure, purchasers who entered into agreements of purchase and sale on or before November 14, 2016, would not be subject to the increased rates of tax.

Purchases of homes that cost less than $2,000,000 would not be affected by the rate increases. In 2015, this included approximately 99 per cent of single-family residence transactions in Ontario, including the Greater Toronto and Hamilton Area.

Restricting the Refund for First-Time Homebuyers to Canadian Citizens and Permanent Residents

The Province is proposing to restrict eligibility of the first-time homebuyers refund program to Canadian citizens and permanent residents, effective January 1, 2017.

As a transitional measure, purchasers who entered into agreements of purchase and sale on or before November 14, 2016, would remain eligible for the refund regardless of citizenship or residency status.

Purchasers who are not Canadian citizens or permanent residents when the transaction closes would have 18 months to become eligible. Upon obtaining Canadian citizenship or permanent resident status, they would be able to apply for the refund within the 18-month period.

Collecting Information about Ontario’s Real Estate Market

The Province is proposing amendments to the Land Transfer Tax Act that would authorize the collection of additional information about properties and purchasers. Information to be collected would be prescribed by regulation and may include:

  • Intended use of property, such as occupancy as a principal residence or use as a rental property;
  • Residency, citizenship and permanent resident status of purchasers; and
  • Type of property, such as residential, commercial, agricultural, industrial or recreational.

The Province will work with the Information and Privacy Commissioner of Ontario in developing this regulation to ensure appropriate steps are taken to protect any personal information collected. Details will be announced in the near future.

Fair Market Value

Most other provinces include fair market value (FMV) in their calculation of land or property transfer tax payable. The use of FMV reduces opportunities for tax avoidance and promotes fairness. The Province will explore changing the basis of the LTT calculation from value of consideration to the fair market value of the property transferred.

Fiscal Impact of Land Transfer Tax Measures

TABLE 5.2 Summary of Land Transfer Tax Measures
($ Millions)
  2016–171 2017–18 2018–19
Doubling the Maximum Refund for First-Time Homebuyers (105) (110)
Modernizing Land Transfer Tax Rates 105 110
Net Impact 0 0
[1] Impacts expected to be negligible.

Business Tax Credits

Ontario Interactive Digital Media Tax Credit

The Ontario Interactive Digital Media Tax Credit (OIDMTC) is a refundable tax credit available to qualifying corporations for expenditures related to the creation, marketing and distribution of eligible interactive digital media products.

The government proposes to improve the administration of the OIDMTC by creating a deadline for corporations to apply for certification of their products. This proposed change would help to reduce application processing times and ensure that applications relate to recently completed products.

For a product to qualify for the OIDMTC, an application for certification would be required to be made by the later of:

  • The day that is 18 months after the end of the taxation year of the corporation in which the development of the eligible product is completed; and
  • The day that is six months after November 14, 2016.