Is land transfer tax payable when a home is transferred between spouses as part of a separation?

Ontario's Land Transfer Tax Act includes a specific exemption for transfers of property between spouses (including same-sex spouses) in certain circumstances, which is particularly relevant in the context of separation and divorce. A transfer of the matrimonial home from one spouse to the other that occurs as a result of a marriage breakdown can qualify for this exemption, meaning no LTT is payable on the transfer.

The exemption requires that the transfer is made between legally married spouses and that it takes place "in accordance with a written separation agreement or a court order." Both conditions must be satisfied. The parties must also be living separate and apart at the time of the transfer.

If the transferring spouse received the property as part of a gift or purchase from the non-transferring spouse (i.e., it is not the matrimonial home), the exemption may not apply automatically. Common-law spouses are not covered by the same statutory exemption, though they may qualify under related rules. The exemption is technical — have a family law and real estate lawyer coordinate on the transfer.