Canada: Four Things You Need To Know Following Ontario's Fall Economic Update

At his Fall Economic Statement, Ontario Finance Minister, Charles Sousa, announced a few changes to the Land Transfer Tax ("LTT") in Ontario which will reduce the LTT burden to first-time home buyers, while increasing the LTT on homes costing in excess of $2 million.

1. First-time home buyers rebate

The first-time home buyers LTT rebate will be doubled to $4,000 from the current $2,000. This tax rebate was introduced to help alleviate the financial burden to first-time home buyers as a result of high home prices in Ontario and the associated higher LTT costs applicable on the purchase. This additional rebate will mean that an Ontario resident first-time home buyer will not pay LTT on the first $368,000 of the cost of his/her home.

First-time home buyers will be eligible for this increased rebate on home purchases completed on or after January 1, 2017.

2. Other first-time home buyer programs and credits

As a reminder, in addition to this increased rebate, home buyers continue to have access to the following credits and other programs available on the purchase of a home.

• RRSP Home Buyer's Plan – First-time home buyers may withdraw up to $25,000 from their RRSP without tax consequences to buy their first home. This withdrawal must be repaid to their RRSP over a 15-year period.
• First-time Home buyer's Tax Credit – Home buyers who have not owned a home in the last four years may be eligible for a non-refundable tax credit of up to $750 on their home purchase.
• GST/HST New Housing Rebate – All home buyers may have access to this rebate on the purchase a newly-constructed or substantially-renovated home. The amount of the rebate and the eligibility criteria varies from province to province.
• Energy Efficient Housing Rebate – There are several rebates available both at the federal and provincial government levels in respect of certain energy efficient housing expenditures and programs.

3. Increase to LTT on homes costing more than $2 million

To fund the increased LTT rebate discussed above, the government will increase the LTT rate (from the current 2% to 2.5%) on homes with a cost exceeding $2 million, effective January 1, 2017.

January 1, 2017 – LTT Rates

The new LTT rate table is as follows:

4. Property tax freeze on rental properties

The Ontario government also announced that it will freeze the property tax on apartment buildings in an effort to provide tenants with relief from higher rental costs. While this freeze is in effect, the government will review the implications of the property tax on the rental market affordability.

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