On December 8, 2016, Bill 70, Building Ontario Up for Everyone Act (Budget Measures), 2016, received royal assent (the “Bill”). Amongst other things, the Bill has made several changes to the Land Transfer Tax Act, R.S.O. 1990, c. L.6 (the “Act”) in Ontario, which could affect those who are looking to purchase a home.
For many individuals, the most exciting change is likely the increased land transfer tax rebate amount for eligible first-time homebuyers. While the rebate used to be $2,000.00, the new Bill has doubled this amount to $4000.00. This increase has been in effect since January 1st, 2017 and therefore eligible purchasers can now take advantage of it. In other words, a first-time homebuyer would not have to pay any land transfer tax on closing when purchasing a home that is $368,000 or less.
In order to be eligible for the $4,000.00 reduction in land transfer tax on closing, a purchaser must have never owned a property anywhere in the world before and the purchaser must also occupy the home as a principal residence within 9 months of the transfer. Furthermore, any first-time buyer purchasing a home after November 14, 2016 must be a Canadian citizen, or a permanent resident. However, first-time home buyers not falling into these citizenship categories can still apply for the refund if they become permanent residents or citizens within 18 months of the closing date.
Another significant change to the Act is the increase in the land transfer tax rate for transfers involving commercial, multi-residential, agricultural and industrial properties. As of January 1, 2017, transactions involving these types of properties are now subject to a land transfer tax rate of 2% on the portion of any consideration in excess of $400,000. This represents an increase of 0.5% from the previous rate of 1.5% for this respective land transfer tax bracket.
The Bill has also increased the land transfer tax rate for residential transfers involving one or two single-family residences, which includes detached and semi-detached homes, condominiums and townhouses. However, the new increase from 2% to 2.5% will only apply to any portion of the purchase price that exceeds $2 million. Given the average home price in Ottawa, this increase should not affect the majority of home buyers.
In view of the obvious impact that these changes may have on your finances, it is important to stay informed about the recent changes in the Act as well as how these changes are applied in Ontario. In the face of any questions or concerns about how these new changes may apply to you, it is always prudent to seek legal advice.
Patrick N. Aubry is a lawyer in the Perley-Robertson, Hill & McDougall’s Real Estate Law Group. He can be reached at firstname.lastname@example.org or at 613.566.2745.