When it comes to real estate, GST applies to the purchase of a newly constructed or substantially renovated residential property. If you are purchasing a newly constructed or substantially renovated home, a way to reduce taxes paid/payable is through the GST New Housing Rebate program which is offered by the government via section 254 of the Excise Tax Act.[1]
This rebate acts as a refund to qualifying purchasers and allows them to recover some of the amount paid on the purchase (of a qualifying residence) offering a rebate on the value of the paid up to approximately 36% on a qualifying new home.[2] To qualify for the GST new housing rebate, the purchaser must not be a non-resident of Canada and must use the property as their primary place of residence, or the property is used as the primary place of residence for someone in specific kinds of relationship to the buyer.[3] The rebate program also applies if the purchaser is acquiring the property as the principal place of residence for their parents, sibling(s), children, spouse or common law partner, or even, a former spouse or common law partner. Consequently, purchasers who are looking for investment properties or multiple homes will not qualify for this rebate if the new home is not intended as the purchaser’s primary place of residence or a relation of theirs.
This rebate on the GST is eliminated once a home has a fair market value of more than $450,000 (before tax). How do you determine how much money a purchaser can save? The maximum amount of rebate that a purchaser can claim is the lesser of either $6,300 or 36% of the total tax paid to buy a home that is valued at or lower than $350,000 for these rules to apply. If the property is worth $350,000 – $450,000 then the amount of rebate that can be claimed is calculated as equal to the lesser of the amount that is $6,300 or 36% of the total tax paid multiplied by the difference between $450,000 and the actual property purchase price divided by $100,000. There are thus limitations on the savings that a purchaser can obtain through this program although this is one mechanism by which homeowners are incentivized to acquire new builds.
By Nicole Duchesne, Student-at-Law
[1] Excise Tax Act, RSC, 1985, c E 15, s 254(2).
[2] Ibid.
[3] Ibid.
