Passing the Family Farm to Your Kids in Ontario: The Land Transfer Tax Break Is Real — and Narrower Than “Family” Suggests
The exemption does not turn on who receives the land. It turns on how the land was used, who was farming it, and why you are transferring it — and cash-rented fields can quietly fail the very first test.
Can I transfer my Ontario farm to my children without paying land transfer tax?
Yes, it can be done tax-free — but “they are my kids” is not the thing that earns the exemption, and treating it as automatic is exactly how families get caught. A parent passing farmland to a child is the classic s.2.1(1) case under R.R.O. 1990, Regulation 697, and where it qualifies it removes the tax that s.2 of the Act would otherwise charge — the provincial land transfer tax only. Qualifying, though, turns on the land rather than the recipient: it must have been used predominantly in farming and carried on exclusively by family — so fields you have merely cash-rented out may not count as farming at all — and the transfer’s principal purpose must be to keep farming, not to sell and split. Route it through a family farm corporation instead and a 95% farming-assets test is layered on top. Either way it is never automatic: Form 013-1205 has to be filed.
Source: R.R.O. 1990, Regulation 697 (under the Land Transfer Tax Act, R.S.O. 1990, c. L.6), ss. 1, 2, 2.1, 2.2; Ontario Ministry of Finance family-farm exemption guidance; e-Laws current version, verified 2026-08-16.
I am Arthur Zhao. Here is the sentence that catches farming families off guard most often across my desk: the parcel you have called a farm for thirty years may not legally be one — not if you have been renting it to a neighbour for a flat cash rent. Ontario does offer a family-farm exemption from land transfer tax, but it is built on a definition of farming that a surprising number of long-time owners quietly sit outside of.
So before we get to who receives the land — a child, a family corporation, the beneficiaries of an estate — the sharper question is what the land was actually doing, and who was doing it. In this piece I walk through Regulation 697 the way I would walk a client through it: the definition first, because that is where the exemption is usually won or lost, then the qualifying conditions, the four family situations you can slot yourself into, and the affidavit you are not allowed to skip.
First: which tax are you actually escaping?
Before anything else, separate three taxes that get blurred together — because it is easy to clear one and forget another.
1. Ontario land transfer tax (provincial). This is the one Regulation 697 addresses. The exemption works by making the charging section — s.2 of the Land Transfer Tax Act — not apply to your conveyance.
2. Municipal land transfer tax. The City of Toronto levies its own Municipal Land Transfer Tax under a city by-law, on top of the provincial one. Farmland rarely sits inside Toronto’s boundaries; if yours does, confirm the municipal treatment separately — do not assume the provincial exemption drags the city tax along with it.
3. Federal income tax. Capital gains, the intergenerational farm rollover and the like live in the federal Income Tax Act — an entirely separate regime with its own conditions. Whether that tax is relieved has nothing to do with the land transfer tax discussed here. Ask your accountant.
The word that quietly disqualifies people: “farming”
Here is the least obvious trap, and it hides inside a single defined word. Regulation 697, s.1 defines farming to include tilling, raising livestock and poultry, dairying, orchards, growing crops for human or animal food, beekeeping and more — but it expressly excludes one thing: leasing out the land where the lessor is not entitled to share in the crops, livestock or other commodities raised on it, or in the proceeds of their sale. In plain terms, renting your fields to a neighbour for a fixed cash rent, with no share of the harvest, is not “farming” under the regulation.
That matters enormously, because many people’s “farm” has in fact been cash-rented out for years while they collect an annual cheque. If that is the arrangement, the land can fail the very first condition — used predominantly in farming — and once that condition fails, nothing further downstream can rescue the exemption.
⚠️If your farmland is currently rented out for a fixed cash rent and you take no share of what is grown, do not assume it meets the “used in farming” test. Under the regulation’s definition that arrangement may fall outside “farming” entirely. Have a tax lawyer confirm how the land was actually used before you transfer it — “it has always been a farm” is not the test the regulation applies.
Two qualifiers do the heavy lifting: predominantly, and exclusively
Assume the land does qualify as farming. Two more words decide most borderline files.
Predominantly. Before the transfer the land must have been used predominantly in farming — not incidentally, not a couple of rows beside a mostly-residential lot.
Exclusively. That farming must have been carried on exclusively by an individual (or individuals) who is a family member of every transferor. Both halves have to line up: who was doing the farming, and their family relationship to whoever is giving up the land.
Then comes the one that does the most damage — principal purpose. The main purpose of the transfer must be to let a family member continue farming the land. If the real plan is for the children to take title and immediately subdivide and sell, continuing to farm is not the principal purpose, and the exemption does not fit. This relief exists to keep farms in production within a family — not to open a tax-free lane to cashing out.
Four family situations — and one that never qualifies
The regulation sorts family-farm transfers into a handful of typical shapes. Find yours:
Individual to individual (s.2.1(1)). One person conveys farmland to another family member — the usual route for handing it to the kids.
Individual to a family farm corporation (s.2(1)). The land moves into a family farm corporation owned by family members.
Estate to individual (s.2.1(1.1)). The personal representative of a deceased owner’s estate transfers to family; the Ministry’s registration statement requires that the deceased, too, was a family member immediately before death.
Family farm corporation to individual (s.2.2(1)). The land comes back out of the corporation to a family member.
One shape gets no exemption at all: corporation to corporation. The Ministry of Finance guidance says so plainly — moving farmland between two corporations does not qualify.
💡 My own read is this: the real gate is not “are you related” — it is “was this land genuinely being farmed by the family, and will it keep being farmed.” Blood is only the ticket in; what the regulation is actually testing for is the survival of the farming itself. So before you move title, answer three honest questions: was the land personally farmed by family before the transfer, or long since rented out for cash? Is the point to keep farming, or to liquidate? And is the 013-1205 affidavit actually prepared? If any of those answers is shaky, do not plan your finances as though the exemption is already yours.
How the exemption is actually claimed
This relief is never automatic — each channel (s.2(2), s.2.1(2), s.2.2(2)) requires the transferee to file a Minister-approved form with the conveyance. Here is the paperwork path the Ministry of Finance sets out.
Complete the farmed-land exemption affidavit
Affidavit, Regarding the Exemption for the Conveyance or Disposition of Farmed Land (Form 013-1205), completed truthfully by all the transferees — or, where the recipient is a corporation, by an officer of that corporation.File it with the land transfer tax affidavit — or select the e-reg statements
If the transfer is not registered, take the return route
Keep the file able to survive a later review
Where a family farm corporation adds a 95% test
If either end of the transfer is a family farm corporation rather than a person, one extra condition appears that the individual-to-individual route does not carry: at least 95% of the value of the corporation’s assets at the time of the transfer — including the land being conveyed — must be attributable to farming assets. On top of that, apart from directors’ qualifying shares, every share must be held by family members. So the corporate route buys you a structure, but it also adds a hard asset test and a shareholder check that a straight individual-to-individual gift avoids.
- R.R.O. 1990, Regulation 697, “Exemption(s) — For Certain Conveyances of Family Farms or Family Businesses,” under the Land Transfer Tax Act, R.S.O. 1990, c. L.6: s.1 definitions and ss. 2 / 2.1 / 2.2 (e-Laws current version, verified 2026-08-16).
- Ontario Ministry of Finance — Family farm exemption: individual to individual.
- Ontario Ministry of Finance — Individual to family farm corporation (95% farming-assets test; Forms 013-1205 / 013-0449).
- Ontario Ministry of Finance — Family farm corporation to individual.
ℹ️This article reflects the current e-Laws version of the regulation and Ontario Ministry of Finance guidance, and is general information only — it is not tax or legal advice. A family-farm transfer usually touches land transfer tax, income tax and estate planning at once; before you act on your own situation, get advice from a tax lawyer and an accountant.
Ontario’s Farm Property Tax Program: Why Most Rural Retreats Don’t Actually Qualify →Gifting Property to Your Children in Ontario: Taxes, Land Transfer Tax, and the Traps →Ontario Land Transfer Tax, Toronto MLTT & First-Time Buyer Rebate (2026) →Ontario Mortgage Guide →
Frequently Asked Questions
Does keeping the farm in the family automatically mean no land transfer tax?
No. Ontario relieves the provincial land transfer tax on family-farm transfers only when the Regulation 697 conditions are met — the land was used predominantly in farming, farmed by family members, transferred to keep the family farming, and supported by the required affidavit (013-1205). Miss one and the tax applies. Toronto’s municipal land transfer tax is a separate matter to check.
My farmland is rented to a neighbour who pays me cash rent. Does it still qualify?
Be careful here. Regulation 697 defines “farming” to exclude leasing out land where you do not share in the crops, livestock or sale proceeds. A flat cash rent with no share of the harvest may mean the land does not count as “farming” — which knocks out the first condition. Confirm how the land was actually used with a tax lawyer before transferring.
Is it different if I transfer to my child directly versus into a farm corporation?
The core conditions — predominantly farmed, farmed exclusively by family, transferred to continue farming — are the same. The difference is that once a corporation sits on either end, at least 95% of its assets must be farming assets, and all shares (beyond directors’ qualifying shares) must be family-held. The individual-to-individual route skips those corporate tests.
Who counts as “family” for this exemption?
Regulation 697 defines “members of the family” broadly — spouse, children, parents, siblings and their spouses or descendants, grandparents, grandchildren and their spouses, and in-laws such as sons- and daughters-in-law. Whether a particular relationship fits is worth checking against s.1 of the regulation, or with a lawyer.
What do I actually have to file, and when?
The exemption is not automatic. On a paper registration, attach the Land Transfer Tax Affidavit (013-0449) and the farmed-land exemption affidavit (013-1205); on an electronic registration, select the matching exemption statements; if the transfer is not registered, file Form 013-0775 with the 013-1205 with the Land Taxes Section. A missing or inaccurate affidavit can trigger reassessment.
Arthur Zhao
Real Estate Broker · FRI · ABR · SRS · PSA · MCNE · E-PRO · CLHMS & GUILD Elite · REAIS
VP & Branch Manager, Bay Street Group Inc.
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