Tag: land transfer tax
Proposed Changes to the Land Transfer Tax Act
The Ontario government introduced Bill 70, Building Ontario Up for Everyone Act (Budget Measures), 2016 (“Bill 70”) for first reading on November 16, 2016. It is currently in its second reading. Bill 70 is an omnibus act that includes significant changes to the Land Transfer Tax Act (LTTA). This change applies only to the Ontario legislation, and does not affect Toronto’s Municipal Land Transfer Tax by-law, which imposes a tax on Toronto transfers in addition to the Ontario land transfer tax.
Once passed, Bill 70 will change the Land Transfer Tax (LTT) rates for commercial property transactions after January 1, 2017 for property exceeding the value of $400,000. The increased rate will not apply to single family homes. Bill 70 does include a grandfathering clause, so the new rates will not apply to agreements of purchase and sale made before November 14, 2016.
Will these changes affect estate administration?
Most simple estates, which may include properties such as a family home or a cottage, will remain unaffected by these changes. Estates with commercial properties may be affected by the increased rates.
Not all transfers of estate property attract LTT. If the real property is gifted directly to one or more beneficiaries under the terms of a will, then no land transfer tax is payable under the LTTA. Likewise, if real property is transferred to a beneficiary to satisfy an interest on an intestacy, no tax is paid pursuant to the LTTA. It is important to note that whether or not land transfer tax is payable under the LTTA, a Land Transfer Tax Affidavit must be completed.
If real property is sold to a third party for the purpose of paying debts or distributing the proceeds between one or more beneficiaries, land transfer tax must be paid under the LTTA. After January 1, 2017, the value of commercial real property over $400,000 will be taxed at 2%, up from 1.5%. If the estate is in a position to close a commercial property transaction before the year end, it may possible to avoid this rate increase.
You can read the proposed changes to the LTTA and to check on the status of Bill 70 at the Legislative Assembly of Ontario website.
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