Land Transfer Tax (Ontario)

 

By Brian Madigan LL.B.

If you buy land or an interest in land in Ontario, you must pay land transfer tax. It doesn't matter whether or not the transfer is registered. Previously, if a conveyance was not registered then you did not have to pay the tax. That opportunity was lost about 20 years ago.

So, now register or not, tax is still payable.

Land includes any buildings, buildings to be constructed, and fixtures (such as light fixtures, built-in appliances and cabinetry). These are the fixtures present at the time of registration. It also includes the value of subsequent installations should they be part of the contract.

If a builder agrees to construct a bathroom in the basement for $5,000, and it is not installed on closing, you must still pay land transfer tax on it. If the arrangement for the installation is made later, you can avoid the land transfer tax. But, remember, maybe you want to pay land transfer tax. Otherwise you are paying retail sales tax which is calculated at a rate about 16 times higher than land transfer tax.

Land transfer tax is normally based on the amount paid for the land, in addition to the amount remaining on any mortgage or debt assumed as part of the arrangement to buy the land. It's paid on the total value, not just the equity in the deal. A $500,000 property with a $300,000 mortgage will require the same tax as a $500,000 property without a mortgage. The sum of $500,000 will be used as the base for purposes of calculation.

In some instances, the value of the consideration is deemed to be the fair market value of the land, for example, leases over fifty years and transfers between corporations and shareholders.

Land Transfer Tax Rates

The tax rates on the value of the consideration are as follows:
Amounts up to and including $55,000 -0.5 %
Amounts exceeding $55,000 up to and including $250,000 - 1.0 %
Amounts exceeding $250,000 - 1.5 %
Amounts exceeding $400,000 where the land contains one or two single family residences - 2.0%

For the definition of "single family residence," as defined in subsection 1(1) of the Act please see the end of this bulletin or the Act.

A Few Quick Examples

$95,000 deal

Value of the consideration equals $95,000.

A. Multiply $55,000 by 0.5% (55,000 × 0.005) = $275
B. Multiply the amount exceeding $55,000 up to $250,000 by 1.0% (40,000 × 0.01) = $400

Total land transfer tax payable = $ 675

$450,000 deal (Commercial Property, Triplex)

Value of the consideration equals $450,000 for land not containing one or two single family residences.

A. Multiply $55,000 by 0.5% (55,000 × 0.005) = $275
B. Multiply the amount exceeding $55,000 up to $250,000 by 1.0%
(195,000 × 0.01) = $1,950
C. Multiply the amount exceeding $250,000 by 1.5% (200,000 × 0.015)= $3,000

Total land transfer tax payable = $5,225

$450,000 deal (single or duplex)

Value of the consideration equals $450,000 for land containing one or two single family residences.

A. Multiply $55,000 by 0.5% (55,000 × 0.005) = $275
B. Multiply the amount exceeding $55,000 up to $250,000 by 1.0%
(195,000 × 0.01) = $1,950
C. Multiply the amount exceeding $250,000 up to $400,000 by 1.5% (150,000 × 0.015) = $2,250
D. Multiply the amount exceeding $400,000 by 2.0% (50,000 × 0.02)= $1,000

Total land transfer tax payable = $5,475

Quick Calculation Formula

For a quick calculation of land transfer tax, refer to the following table. Residential property refers to land containing one or two single family residences as defined by the Act. "Value of the Consideration" for a conveyance or disposition is shown as "VC." Land transfer tax payable is shown as "LTT."

For the Value of the Consideration:

Up to and including $55,000 = VC × 0.005
Exceeding $55,000 and up to $250,000 = (VC × 0.01) - $275
Exceeding $250,000, for property other than residential = (VC × 0.015) - $1525
Exceeding $250,000 up to $400,000, for residential property = (VC × 0.015) - $1525
For residential property exceeding $400,000 = (VC × 0.02) - $3525
Toronto Land Transfer Tax

In addition to the Land Transfer Tax that applies to every property in the Province of Ontario, there is also a Toronto Land Transfer Tax that just applies to city of Toronto properties. It is collected by the Province and remitted to the City.

Brian Madigan LL.B., Realtor is an author and commentator on real estate matters, Royal LePage Innovators Realty
905-796-8888
www.OntarioRealEstateSource.com