Basics of Purchasing a New Home

The purchase of a new home is an exciting event. The purchase of a new home can be a special and unique experience allowing you the design input to build your dream home.

However, while you work with a builder to choose your custom finishes and choice fixtures and fittings, you may have overlooked an important clause in your agreement of purchase and sale on HST.

In Ontario, HST is a hybrid sales tax of 13% paid by the final consumer of most goods and services. We all know this, but do we pay HST on new homes?

The answer is yes. As of June 30, 2010 all new homes are subject to 13% HST. S.O. 2009, c.34

Luckily, the government of Ontario and Canada have implemented a rebate to specified individuals to recover some of the HST payable on a new home build.

Are you eligible?

Individuals who are eligible include those who:

• purchased new housing or constructed or substantially renovated housing, which could include housing on leased land (if the lease is for at least 20 years or gives you the option to buy the land), for use as your (or your relation’s) primary place of residence

• purchased shares in a co-operative housing (co-op) complex for the purpose of using a unit in the co-op for use as your (or your relation’s) primary place of residence

• constructed or substantially renovated your own home, or hired someone else to construct or substantially renovate your home for use as your (or your relation’s) primary place of residence and the fair market value of the house when the construction is substantially completed is less than $450,000

Courtesy of: https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/gst-hst-businesses/gst-hst-home-construction/gst-hst-new-housing-rebate.html

Eligibility requirements should be discussed with your lawyer, to determine whether your specific case qualifies you for the rebate.

So, how much?

Rebate amounts are broken down into two components:

First, the Federal GST New Housing Rebate. An eligible individual will get:

• On the first $350,000.00 of the pre-tax purchase price, a rebate of 36% of the 5% GST payable

The rebate rate of 36% declines to zero between $350,000.00 and $450,000.00. The rebate is completely eliminated when the pre-tax purchase price rises to $450,000.00. Any new home in excess of $450,000.00 will never see a Federal GST rebate.

Second, the Ontario HST New Housing Rebate. Although the name of the rebate is misleading, this rebate only applies to the RST portion of the HST.

An eligible individual will get:

• 75% of the 8% of the RST. Or, in other words, 6% of the price of the new home

The rebate only applies to the first $400,000.00 of the price at a maximum of $24,000.00. What this means, is if the price of your new home exceeds $400,000.00 the rebate will not be more that $24,000.00. This amount will be rebated regardless of the price of the home in excess of $400,000.00.

Navigating the HST rules and HST rebates can be difficult and are complex. If not properly canvassed, you may find yourself responsible for paying thousands of dollars on closing day. You should consult your lawyer to determine eligibility and applicable rebates specific to your circumstances.

It is important to have your lawyer review your agreement early on in process to provide proper advice on your new purchase.