New residential property/home
5% GST is payable on the purchase price of newly constructedor substantially renovated residential homes. Substantially renovated is defined in the legislation as the removal or replacement of most of the house construction components except for the foundation, external walls, interior supporting walls, floor, roof and staircase. This includes assignment of contracts.
“Used” residential property/home
GST is not applied to used housing, as the first owner of the property would have already paid it (unless substantially renovated – see above).
GST New Home Rebates
- If the purchase price is $350,000 or less, new home buyers can apply for a rebate of the 5% GST. The rebate is up to 36% of the 5% GST to a maximum rebate of $6,300.
Assume the purchase price of a new home is $350,000 excluding GST. The gross GST. is $17,500 (5% of $350,000). The GST New Housing Rebate is 36% of $17,500, which is $6,300. Thus, the applicable GST. is $17,500 less $6,300, which equals $11,200.
- If the purchase price is between $350,000 and $450,000, there is a proportional GST rebate.
The rebate is gradually reduced and is calculated by using the following formula:
$6,300 x [$450,000 – the purchase price] / $100,000
For example, assume the purchase price of a new home is $400,000 excluding GST The GST New Housing Rebate is:
$6,300 x [$450,000 – $400,000.00] / $100,000
Which equals $3,150. The gross GST would be 5% of $400,000.00, which equals $20,000.00, less the partial GST New Housing Rebate of $3,150.00, for a net tax of $16,850.00.
- If the purchase price is over $450,000,there is no GST New Housing Rebate.
* Please note that the Developer may agree in the Contract to credit the Purchaser on completion for the rebate, but not all Developers allow this. If they do not, the Purchaser will have to pay the full 5% GST on completion and will then have to apply directly to C.R.A. for the GST New Housing Rebate after closing. This means the Purchaser will have to ensure that they have additional funds to cover the 5% GST on completion. Note the GST New Housing Rebate is not available to a corporation or a partnership. If the developer pays the GST, the buyer will be required to sign over the rebate to the developer when it is received.
If a Purchaser is planning to rent out the new home, they may be eligible for a GST New Residential Rental Rebate. The full GST NRR Rebate is only available on new homes priced up to $350,000. A partial GST NRR Rebate is available for homes priced between $350,000 and $450,000. To be eligible the purchaser must meet certain conditions which include:
- The Purchaser must not be entitled to claim input tax credits in respect of any part of the tax payable on the acquisition of the rental unit.
- The rental unit must be a “qualifying residential unit” which means the person applying for the rebate must be the owner of the unit and the unit must be a self-contained residence as defined in the Excise Tax Act
- The unit must be held by the owner for the purpose of making exempt supplies (for example, a residential tenancy)
- The unit must be used as a primary place of residence by the tenants and must be so used for at least one year and the Purchaser will have to provide a copy of the tenancy agreement showing a term of at least one year.
* Please note that the Developer is not allowed to credit the Purchaser on completion with the GST NRR Rebate. This means the Purchaser will have to pay the full 5% GST on completion and then claim the GST NRR Rebate afterwards directly from C.R.A. The Purchaser will have to ensure that they have the necessary funds to cover the 5% GST on completion.