The Ontario government has announced a package of new tax initiatives that it says would provide $1.4 billion in provincial tax relief for business and people over three years.

The proposals are included in the 2007 Fall Economic Outlook and Fiscal Review.

The Ontario government is giving all first-time homebuyers a break on land transfer tax by proposing to expand the Land Transfer Tax Refund Program to include purchases of resale homes, Finance Minister Dwight Duncan announced today.

Effective midnight tonight, first-time buyers of resale homes, as well as newly constructed homes, would be eligible for a refund from the provincial government of up to $2,000 of the Land Transfer Tax paid.

LSIF tax credit extended

Among other new tax initiatives, Ontario is extending the Labour-Sponsored Investment Fund (LSIF) tax credit and increasing the maximum investment that qualifies for the provincial tax credit from $5,000 to $7,500.

On Sept. 30, 2005, the government established a phase-out of the LSIF tax credit. The timetable of the phase-out allows investors who purchase LSIF shares to receive a provincial tax credit until the end of the 2010 tax year. The government also introduced amendments to investment requirements and special wind-down rules to provide LSIFs greater flexibility in managing their portfolios.

The government proposes to extend the phase-out of the LSIF tax credit by one year by:

  • maintaining the 15% tax credit rate until the end of the 2009 tax year;
  • lowering the rate to 10% for the 2010 tax year;
  • lowering the rate to 5% for the 2011 tax year; and
  • eliminating the credit for tax years after 2011.

The government also proposes to increase the maximum investment that qualifies for the provincial tax credit from $5,000 to $7,500.

The proposed changes will provide an estimated $38 million in additional financial assistance to the industry over three years. These measures are intended to assist LSIFs in the development of their investment strategies and in providing continuing support to the portfolio of companies in which they have invested.

Capital Tax rate cuts accelerated

The government also proposes to accelerate to January 1, 2007, the Capital Tax rate cuts currently scheduled for January 1, 2009, two years ahead of schedule.

As previously legislated, the Capital Tax deduction will rise from $12.5 million to $15 million on January 1, 2008. Capital Tax will be fully eliminated on July 1, 2010.