Land Transfer Tax
There has been a lot of discussion about the intent of the newly elected Liberal party to enable all Ontario municipalities to charge a municipal land transfer tax.
Here’s what you need to know:
Update: December 1, 2015: It was announced that cities outside of Toronto will not be allowed to charge a land transfer tax.
- When you buy land or property, you pay a provincial land transfer tax. You can learn more about the land transfer tax rates here.
- Municipalities may be given the option to implement this tax collection function would which would even the field across all Ontario municipalities, giving them consistent access to homeowner tax support. Toronto is currently the only municipality with land transfer taxing authority, which was granted in 2006. The municipal tax adds thousands of dollars to the cost of a home
- A few numbers to demonstrate the potential taxing effects: “The purchaser of a Toronto home selling for $450,000 will pay a total of $10,200 in land transfer tax–$5,475 to the province and $4,725 to the city” – The Toronto Star
- Paying a land transfer tax to both the province and the municipality puts more financial pressure on home buyers, especially first-time home buyers.
- If this authority is granted to all municipalities, implementation will remain optional.
- The additional tax would provide municipalities with an additional revenue source. In many cases this revenue is needed to maintain and upgrade city systems, local infrastructure, programs and services.
- A point that is generating a great deal of heated discourse is that the implementation of the municipal tax means only a select group (home buyers) will be paying for municipal systems and services for everybody to benefit from.
- This might negatively affect municipalities by acting as a disincentive to potential newcomers to a region.
Both Toronto’s housing market and overall economy have been growing, despite the land transfer tax. It is however a larger city with a large market, which may not have the same results as a smaller municipality in Ontario. The provincial land transfer tax as a possible option for municipalities means each municipality can choose to do what is best for them.
The implementation of a second land transfer tax will make affordable housing harder to obtain. It may also impact the number of real estate sales; people may choose not to move at all. Or those who move, may move to municipalities who do not collect the municipal land transfer tax.
At this time, the Liberal party has insisted that nothing has been officially decided regarding the municipal land transfer tax.
Ontario Real Estate Association Opposes the Tax
Ontario REALTORS®, backed by the Ontario Real Estate Association (OREA) oppose the municipal LTT on the basis that it is fundamentally unfair, potentially bad for the economy and an unreliable source of local revenue.
The organization is actively lobbying the government and calling on the support of Ontario residents. If you are interested in more information and would like to get involved, visit their recently launched site: Don’t Tax My Dream.
Land Transfer Tax Calculator – Find out how much the potential tax could affect you.