Last week’s column discussed the National Home Buyer’s Plan, a popular government program designed to help first-time buyers enter the housing market. This week’s column will discuss a program with a similar purpose -- to encourage consumers to invest in the real estate industry. Unlike the National Home Buyer’s Plan, however, this program is limited to the Province of Ontario.

In Ontario, when a home is bought, the purchaser must pay a special tax known as Land Transfer Tax. This tax is payable on closing. The value of Land Transfer Tax is based on the value of the home being purchased. For example, if you purchase a house for $200,000, you will owe $1,725.00 in Land Transfer Tax.

In an effort to stimulate the real estate industry and the purchase of new homes by first-time buyers, the Ontario government introduced a refund of Land Transfer Tax in its 1996 Ontario Budget. The program was subsequently renewed every year, and it is now a permanent program.

Firstly, the program only applies to newly built homes. Those buying a resale home may not participate in the program. Secondly, you must be a first-time homeowner. Thus, you cannot have previously owned a home or an interest in a home anywhere in the world. The same rule applies to your spouse for the period of time that he or she has been your spouse. Thirdly, you must be at least 18 years old to qualify for the program.

The maximum rebate of Land Transfer Tax is $2,000, the equivalent to the Land Transfer Tax payable on a purchase price of $227,500 (net of GST). If an individual owns less than a 100 per cent interest in the newly built home, the amount of the rebate would be reduced and calculated according to the interest in the home. For example, if you own 100 per cent of your new home and you paid $250,000 for the home, the amount of Land Transfer Tax payable is $2,225. You would receive the maximum refund of $2000. If, however, you own a 50 per cent interest in your home, the amount of the refund would be 50 per cent of $2000, or $1,000.

Individuals who have received a refund of Land Transfer Tax based on the Ontario Home Ownership Savings Plan (OHOSP) do not qualify for the program.

The Land Transfer Tax refund program allows eligible participants to receive their refund by filing an Affidavit (a sworn statement that your lawyer will prepare on your behalf) for refund at the Land Registry Office at the time of registration. If you do not apply for the refund at the time of registration, you may apply by contacting the Ministry of Finance.