Toronto imposes new Land Transfer Tax

The City of Toronto has passed the controversial new land transfer tax. In addition to the existing land transfer tax, an extra tax is payable on residential and commercial property purchases, including vacant land.

EXISTING ontario Land Transfer Tax:

Land transfer taxes are levied on properties that are changing hands, are the responsibility of the purchaser. Current tax rates (effective from June 1, 1989)

• 0.5% of the value of consideration for the transfer up to and including $55,000,  
• 1% of the value of the consideration which exceeds $55,000 up to and including $250,000, and  
• 1.5% of the value of the consideration which exceeds $250,000, and
• 2% of the amount by which the value of the consideration exceeds $400,000 for land that contains at least one and not more than two single family residences.

ADDITIONAL NEW Land Transfer Tax :

New tax rates (on purchase agreements signed after Dec 31, 2007 and close after Feb 1, 2008). The Toronto land transfer tax only applies to transactions within the City of Toronto. This does NOT apply to property transactions outside of the City of Toronto.

Grandfathered Transactions: Any transactions where the purchaser and vendor have entered into an Agreement of Purchase and Sale for the property prior to December 31, 2007 will be rebated the full amount of the Toronto land transfer tax, regardless of the closing date. (City of Toronto will soon be provinding clarification on this)

• 0.5% on first $55,000,  
• 1% on next $345,000, and
• 2% on portion over $400,000

A rebate of up to $3,725 will apply to first-time buyers of homes. That would result in a full rebate for first time buyers of homes valued at $400,000 or less.

why toronto imposed new land transfer tax:

City of Toronto’s projected revenue shortfall for 2008 budget is approximately $415 million. The city will be able to raise additonal $155 million by Land Transfer tax and another $20 million by the new Toronto Vehicle ownership tax. That means a revenue shortfall of perhaps $239 million for next year’s budget. This may translate into new taxes on property, alcohol, road tolls, entertainment, parking, billboards etc.

Toronto is the ONLY jurisdiction with two home buying taxes, highest land transfer taxes in Canada and the second highest in North America.

what may happen now:

A second land transfer tax (LTT) on top of current provincial LTT, is almost 100% increase which might slow down real estate activity for short period of time only.

Home buyers will have less money for downpayment, furniture, appliances or renovations. This could ultimately cost over $15,000 for an average buyer when coupled with other real estate closing costs and goods that follow home’s purchase. First-time buyers will not get affected as they will NOT pay the City’s new land transfer tax on first $400,000 of their property’s price.

Since there is no new local home buying tax in 905 region more buyer and investors will move out of Toronto. Real estate markets outside Toronto will grow more as many investors and buyers will move into Mississauga, Oakville, Milton, Brampton, Markham, Richmond Hill, Ajax and Pickering.

Also read new Ontario land transfer tax rebate for first time buyers, as of Dec 14, 2007