On November 14, 2016, the Ontario Minister of Finance, Charles Sousa, presented the 2016 Ontario Economic Outlook and Fiscal Review in the Ontario Legislature. Among the various proposals in the Outlook, the Minister proposes to "modernize" Land Transfer Tax. The modernization includes: doubling the maximum refund for first time home buyers; increasing the rate payable on residential properties; and increasing the rate payable on non-residential properties. Land transfer tax rates are currently:

• 0.5% on the first $55,000;
• 1% above $55,000 to $250,000;
• 1.5% above $250,000; and
• 2% above $400,000 if the land contains one or two single-family residences.

For residential properties, the proposed changes would add a new rate of 2.5% on that component of the purchase price in excess of $2 million. For non-residential properties, there would be a new rate of 2% on that component of the purchase price over $400,000.

The changes are proposed to be effective as of January 1, 2017, but as a transitional measure, purchasers who entered into agreements of purchase and sale on or before November 14, 2016, will continue to pay land transfer tax based on the current rates.

In addition to increasing the rates, the Province proposes to collect additional information about purchasers and properties which might include: the type of property (residential, recreational, commercial, agricultural or industrial); the intended use of the property (principal residence or use as rental property); and the residency, citizenship or permanent residence of the purchaser. The Province is also proposing that the credit for first time home buyers be available only to Canadian citizens and permanent residents.

Finally, the Province is exploring changing the basis of the land transfer tax calculation from the current "value of the consideration" (which is most often just the purchase price but which can include more than the purchase price) to the fair market value of the property on the grounds that this will reduce the opportunities for tax avoidance and will promote fairness. The Province has not indicated on what basis it will determine fair market value nor has it indicated whether transfers which have to date been exempt because there was no "value of the consideration" paid would be taxable on the fair market value of the land.