An Introduction to Property Classification in Ontario
All land in Ontario must be assigned to a property class or classes for property taxation purposes. A property’s classification is shown on the assessment roll that MPAC provides to Ontario’s municipalities, local taxing authorities and the Minister of Finance. The rolls are used to calculate the property and education taxes owed by each property owner. Municipalities set tax rates for each property class according to their annual revenue requirements. They are responsible for issuing tax bills, collecting property taxes to support local services and collecting education taxes on behalf of the Provincial Government. In non-municipal territory, the Ministry of Finance levies taxes directly.
Property classification is the activity of assigning a property or a portion of a property to one of the property classes or subclasses defined in Ontario Regulation 282/98 under the Assessment Act; or alternatively a class of property prescribed under clause 257.12 (1)(a) and defined in Ontario Regulation 400/98 under the Education Act.
As provided by section 7(1) of the Assessment Act, there are seven major property classes – residential, multi-residential, commercial, industrial, pipe line, farm and managed forests. The definition of each of these classes is prescribed by the Minister of Finance in Ontario Regulation 282/98.
There are eight optional classes: new multi-residential, office building, shopping centre, parking lots and vacant land, residual commercial, large industrial, professional sports facility and resort condominium.
Each municipality has the option to decide whether it wants to have any or all of these classes apply to their municipality. If a municipality does opt to have the class apply, it then has the flexibility to apply a different tax rate to that class. The residual commercial property class has only been adopted in the City of Toronto.
Business Education Tax (BET) – New Construction Classes
The six BET classes are: commercial (new construction), industrial (new construction), shopping centre (new construction), office building (new construction), residual commercial (new construction) and large industrial (new construction). The residual commercial (new construction) property class is only adopted in the City of Toronto.
These classes have been created to allow the municipality to levy a lower education tax rate on new construction for which a building permit was received by the municipality after March, 2007. The definition of each of these classes is prescribed by the Minister of Finance in Ontario Regulation 400/98.
A subclass of real property means, for land located in a municipality, a subclass described in section 8(1) of the Assessment Act. The three subclasses are for farmland awaiting development, vacant land and excess land. The subclasses are defined in detail in Ontario Regulation 282/98. The identification of subclasses allows municipalities to apply a lower tax rate to properties, or portions of properties, within the subclass.
Guiding Principle of Classification
The primary distinction between the various property classes is the use of the land. If portions of a property are classified in different classes of real property or subclasses of real property, MPAC determines the share of the value attributable to each class or subclass, assesses the property according to the proportion that each share constitutes of the total value and sets out each proportion on the assessment roll.
If a property or a portion of a property is not included in any property class based on its use, Ontario Regulation 282/98 requires that it be defaulted to the commercial property class.
|Ontario Regulation 282/98|
|Property Assessment and Classification Review - Guiding Principles|
|Tax Bulletin: Business Education Tax Rate for New Construction|
|City of Toronto: Tax Rate Reduction for Commercial Properties|
Note: This procedure has been developed to provide the public with a general understanding of property classification. The applicable law prevails to the extent if there is any conflict between the procedure and the relevant law.