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Ontario releases tax guidelines
Will impact land transfer tax paid on new homes
T
he Province of Ontario quietly released tax guidelines at the end of March that could significantly increase the amount of land transfer tax buyers pay for a newly constructed home.
Purchasers of new homes often agree to a base price and then advise the builder of any extras and upgrades they would like to add. The tax bulletin says the value of these extras and upgrades are to be included in determining the amount to be declared in the land transfer tax statements, called the “value of the consideration”.
The bulletin says this includes items that are part of the permanent structure, such as architectural changes, extra doors and entrances, whirlpool baths, finished basements, roughed in washrooms and fireplaces. It also includes upgrades to flooring, cupboards, doors, windows and counters, as well as exterior upgrades like lot premiums, tree plantings, driveway paving, sodding and grading.
The guidelines also appear to introduce a form of double taxation. The bulletin states that the value of the consideration is to include the value of any liability assumed and miscellaneous costs incurred by the builder as part of the arrangement relating to the conveyance that are passed to the new homebuyer. These include lot levies, development charges, school levies, architect fees, and the Ontario New Home Warranty Plan Fee.
These are the first guidelines released for the determining the value of the consideration for new homes transfers. Critics have blasted the Liberal government for failing to consult with industry stakeholders before quietly introducing the new guidelines. A Toronto lawyer has suggested the provincial government could make the new tax grab retroactive to March 31st, which would create an administrative nightmare.
Homebuyers in Ontario pay a land transfer tax of $5 for every $1,000 in value up to $55,000; $10 from $55,000 to $250,000; $15 from $150,000 to $400,000, and $20 for over $400,000. First-time buyers of new homes and new condos can get up $2,000 in rebates.
To view the complete bulletin, click here.
April 28, 2006 in Legal Considerations | Permalink
