Ontario’s Municipal Property Assessment Corporation (MPAC) has completed its reassessment of all real property in Ontario which will take effect on January 1, 2009.
There have been legislative changes enacted by the Province affecting both business and residential properties. This Advisory focuses on the changes affecting business properties only.
THE NEW ASSESSMENT CYCLE
All real property in Ontario has been reassessed using a 2008 “base year”. This new value will form the basis of the assessed value of property for the taxation years 2009-2012 inclusive. Any increases in assessed value will be phased-in over the next four years by 25% of the increase in value each year. In other words, if the new assessed value of a property is $1,000,000 and the previous assessed value was $800,000, the assessed value of the property will be $850,000 in 2009, $900,000 in 2010, $950,000 in 2011 and $1,000,000 in 2012.
Notices of Assessment have now been mailed to all property owners. Your assessment notice will identify the increase in assessed value for your property as well as the phase-in details.
As owners of business properties know, there has been a complex system of property tax caps and clawbacks in place for many years now. For the present time, capping of business property taxes continues. However, some business properties are starting to come out of the capping mechanism and the province has introduced business education tax reductions for properties with new construction. Business property owners should carefully review their assessment notices and property tax bills and seek professional advice to ensure they are minimizing their property taxes.
APPEALING YOUR ASSESSMENT
On average, assessed values of business properties have increased significantly, by a range of 20% to 50%. This means that, even with the phasing-in of the increased assessed values, many property owners may experience noticeable tax increases in the coming years.
More importantly, the increased assessed values returned by MPAC may now be outdated in that they are based on the continuing assumption that property values will escalate as they have been for the past several years. Recent economic events and emerging trends in the real estate market mean this assumption is most likely incorrect. By the end of the fouryear assessment cycle in 2012, many business properties could well be substantially overassessed.
We therefore recommend that all business property owners should appeal their property’s assessment. The deadline to do so is March 31, 2009.