In section 18 of the Generational Transformation of Toronto’s Housing System to Urgently Build More Affordable Homes in item h, the city plan states “introducing an anti-flipping tax on residential properties sold within the first 12 months of ownership.” 1
Renovators who have a business built on buying properties, doing a rapid reno and selling, to reap a profit will be stymied.
At the federal level,
Effective January 1, 2023, under new subsection 12(12) of the Income Tax Act (“ITA”), the gain on the disposition of a “flipped property” will be fully taxable as business income. Additionally, no principal residence exemption will be available to reduce the tax arising from the sale of the property.
Exceptions,
The term “flipped property” is now defined in the ITA and will generally include a residential property (or right to such property) that is located in Canada and owned by the taxpayer for less than one year.
- The breakdown of marriage or common-law partnership of the taxpayer if the taxpayer has been living separate and apart from their spouse or common-law partner for at least 90 days prior to the disposition;
- The threat to the personal safety of the taxpayer or a related person;
- The taxpayer or a related person suffering from a serious illness or disability;
- An “eligible relocation” of the taxpayer or spouse or common-law partner;
- The involuntary termination of employment of the taxpayer or their spouse or common-law partner;
- The insolvency of the taxpayer; or
- The destruction or expropriation of the property against the taxpayer’s will. (https://welchllp.com/insights/knowledge/new-residential-property-anti-flipping-tax-rules/)
- Source,EX9.3 – Generational Transformation of Toronto’s Housing System to Urgently Build More Affordable Homes Nov 8th 2023
