A land transfer tax (LTT) is a government-imposed fee applied when ownership of a property transitions from one owner to another. Typically borne by the buyer, this tax is calculated as a percentage of the property's purchase price and varies based on location and local government policies.

Land transfer taxes serve to generate revenue for the government, which can then be used to fund essential public services, such as healthcare, education, and infrastructure.

The Municipal Land Transfer Tax (MLTT) was originally introduced on February 1, 2008, and is in addition to the provincial Land Transfer Tax (LTT) on residential properties transferred within the City of Toronto

In early 2023, the Toronto City Council (the "Council") sought additional housing-related revenue to address a funding shortfall. Initially, the Council proposed a 1% increase to the MLTT for "luxury" homes priced over $2 million.

The proposed increase aimed to boost the housing supply and provide financial relief for homebuyers after the unprecedented surge in housing prices during the COVID-19 pandemic.

Facing a concurrent 5.5% property tax increase, organizations like the Toronto Regional Real Estate Board (TRREB) contested the proposal. They argued that such an increase would deter "move-up" buyers from listing their properties, adversely affecting housing supply and affordability.

Instead of proceeding with the proposed 1% increase, on September 6, 2023, the Council approved graduated MLTT rates with additional thresholds for high-value residential properties containing at least one, and not more than two, single-family residences.

The new additional MLTT threshold rates will be applicable to any property transfers that are either officially registered or for which the MLTT becomes due on January 1, 2024, or any date thereafter and will impact high-value residential properties that are valued at $3 million or above.

The current and new additional MLTT rates are broken down by the applicable thresholds and rates as follows:

CURRENT MLTT RATES

Value of Consideration

MLTT Rate
Up to and including $55,000 0.5%
$55,000.01 to $250,000 1.0%
$250,000.01 to $400,000 1.5%
$400,000.01 to $2,000,000 2.0%
> $2,000,000 2.5%


Additional MLTT thresholds and rates, for property valuations greater than $3 million, effective January 1, 2024:

ADDITIONAL MLTT RATES

Value of Consideration

MLTT Rate
> $3M to $4M 3.5%
> $4M to $5M 4.5%
>$5M to $10M 5.5%
>$10M to $20M 6.5%
>$20M 7.5%


The MLTT is calculated based on different tax rates for different portions of the property's value.

For example, if you were purchasing a property for $3.5 million, your current MLTT calculation would be broken down as below:

CURRENT MLTT FOR A $3.5M RESIDENTIAL PROPERTY

Graduated Calculation

Amount
0.5% on the first $55,000
Calculation: 0.005 * $55,000		 $275
1.0% on the next $195,000 ($250,000 – $55,000)
Calculation: 0.01 * $195,000		 $1,950
1.5% on the next $150,000 ($250,000 – $400,000)
Calculation: 0.015 * $150,000		 $2,250
2.0% on the next $1,600,000 ($2,000,000 – $400,000)
Calculation: 0.02 * $1,600,000		 $32,000
2.5% on the remaining $1,500,000 ($3,500,000 – $2,000,000)
Calculation: 0.025 * 1,500,000		 $37,500
TOTAL MLTT: $73,975


Teraview provides a free MLTT calculator with the current rates here.

Therefore, if you were purchasing a property prior to January 1, 2024, for $3.5 million, the MLTT would be $73,975.

As of January 1, 2024, a property purchased for $3.5 million in Toronto, would incur an MLTT of $78,975 resulting in an additional $5,000 in MLTT.

MLTT FOR A $3.5M RESIDENTIAL PROPERTY AS OF JANUARY 1, 2024

Graduated Calculation

Amount
0.5% on the first $55,000
Calculation: 0.005 * $55,000		 $275
1.0% on the next $195,000 ($250,000 – $55,000)
Calculation: 0.01 * $195,000		 $1,950
1.5% on the next $150,000 ($250,000 – $400,000)
Calculation: 0.015 * $150,000		 $2,250
2.0% on the next $1,600,000 ($2,000,000 – $400,000)
Calculation: 0.02 * $1,600,000		 $32,000
2.5% on the next $1,000,000 ($3,000,000 – $2,000,000)
Calculation: 0.025 * 1,000,000		 $25,000
3.5% on the next $500,000 ($3,500,000 – $3,000,000)
Calculation: 0.035 * 500,000		 $17,500
TOTAL MLTT: $78,975


The City of Toronto website provides a free MLTT calculator with the new rates here.

In addition to the applicable MLTT, the LTT is also calculated on a gradual basis and charged at the time of registration of the transfer of the property. For a purchase price of $3.5 million, you would be paying $73,955 in LTT in addition to the MLTT costs above, irrespective of whether the transaction is completed prior to, or after January 1, 2024. Teraview provides a free LTT calculator here.

This approved increase in the MLTT on residential properties valued at $3 million and above, is one revenue stream that the City of Toronto is utilizing as part of its approved long-term financial plan, to aid in its budgetary shortfall for 2024.

The long-term repercussions of the MLTT rate increase on the residential real estate market are uncertain. This adjustment has the potential to discourage prospective purchasers from entering the luxury market, leading to the emergence of a segment of buyers more attuned to pricing sensitivity. It might also incentivize buyers to explore properties below the MLTT increase threshold, fostering a market that is more stable and sustainable.

If you are considering purchasing a high-value residential property with a valuation over the $3 million threshold, it may be prudent to take advantage of the opportunity to complete the transaction prior to January 1, 2024, to avoid increased MLTT expense.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.