The property tax shift from Toronto’s new small business subclass will have a greater magnitude than originally estimated when City Council approved the parameters for the relief measure last fall. A report to Toronto Council’s budget committee advises that approximately 29,000 businesses will qualify for a 15 per cent reduction in the tax rate, necessitating a 0.99 per cent increase for the remainder of commercial ratepayers. The offset had previously been pegged at 0.85 per cent.
The introduction of the new tax subclass — which was enabled through an amendment to Ontario’s Assessment Act last year — comes in the overarching context of a recommended 2.2 per cent increase to the commercial tax rate for 2022. Budget deliberations are scheduled for the February 19 Toronto Council meeting.
As provincial legislation now authorizes, any Ontario municipality can enact a bylaw to set criteria for a small business subclass and reduce tax rates by up to 35 per cent for qualifying ratepayers. It has been left to municipalities to set eligibility criteria and determine whether rate reductions will be financed within the commercial tax class or across the broader tax base. Once the tax rate reduction is established, municipalities can apply to the provincial government for a corresponding reduction in the education tax rate for qualifying properties.
Under Toronto’s rules, all commercial properties with a current assessed value (CVA) no greater than $1 million qualify. As well, commercial properties in the downtown, waterfront districts, on an arterial strip designated as one of the “Avenues” in Toronto’s Official Plan or in designated commercial “centres” are eligible, provided that: either the lot size is no greater than 7,500 square feet or the commercial condominium unit has no more than 2,500 square feet of gross floor area; and the CVA does not exceed $7 million.
“A strong majority of business organizations, representing both large and small commercial properties have been consistent in their preference for the small business tax subclass to be funded across all property classes,” states a communique from REALPAC, on behalf of a number of the city’s commercial real estate organizations. “This would significantly reduce tax burden shift onto non-subclass commercial properties.”
