GST REBATES

GST is payable on the purchase of a new house at the current rate of 5% in Ontario. A new house includes townhomes, singles, terrace homes, and condos.

There are currently Two rebates available.

1. NEW HOUSING REBATE

2. NEW RESIDENTIAL RENTAL PROPERTY REBATE

Both Rebates essentially deliver the same costs to the purchaser, the only issue is waiting time to received the NEW RESIDENTIAL RENTAL PROPERTY REBATE.

On the CAPITAL GAINS Income Tax consequences when you sell this house, your intent to rent the house as a residential rental property eliminates your PRINCIPAL RESIDENCE EXEMPTION claim in the year you dispose of this house, whereas the NEW HOUSING REBATE helps your EXEMPTION and Tax Free sale of the house.

NEW HOUSING REBATE

The New Home Builder charges the NET GST (3.2% GST on the selling price) and is included in the selling price under the assumption that you qualify for the NEW HOUSING REBATE. Your Lawyer will confirm your eligibility on the date of closing and may request the 1.8% GST difference should you not qualify for the NEW HOUSING REBATE.

If the new house you are purchasing will be used as your primary place of residence for yourself or a relation you may qualify for a NEW HOUSING REBATE. Only one purchaser can claim the rebate. If you use more that 50% of the house as your primary place of residence you will qualify for 100% of the rebate. If you use 25% of the house as your primary place of residence and plan to rent out the remaining 75%, then you will only qualify for 25% of the rebate.

You will not qualify for the NEW HOUSING REBATE, if

1. you purchase your new house through a partnership,
2. you purchase your new house through a corporation,
3. a corporation or partnership is a part owner of the new house,
4. you have previously claimed a NEW HOUSING REBATE in the year,
5. you are not a resident of Canada. or
6. your purchase price excluding GST is over $450,000.00

Example:

Say the builder is selling a new home for $250,000.00. The true selling price is $242,248.06. GST charged is $7,751.94 calculated as follows:

If you qualify for the GST NEW HOUSING REBATE,

you get 100% of the rebate on new houses less than $350,000,

or partial rebates from $350,000.01 to $449,999.99.

Visit www.centax.ca to get a copy of the GST NEW HOUSING REBATE FORM.

NEW RESIDENTIAL RENTAL PROPERTY REBATE

As a landlord, you cannot recover the GST tax paid because residential leases are exempt from GST/HST. However, you may be able to claim the NEW RESIDENTIAL RENTAL PROPERTY REBATE to recover part of the GST/HST tax you paid to purchase a rental property . Each Landlord qualifies for the rebate based on his or her percentage of ownership in the new rental property. You can apply for a NEW RESIDENTIAL RENTAL PROPERTY REBATE for each new house purchased provided the intention is to purchase the house as a rental property.

You will not qualify for the NEW RESIDENTIAL RENTAL PROPERTY REBATE, if

1. you are entitled to the NEW HOUSING rebate on the same property,
2. a prior rebate application was made for this same new house,
3. you have claimed the GST paid on self assessed GST returns,
4. you do not provide copies of residential leases and purchase details to the government at time of rebate claim,
5. you are not a resident of Canada. or
6. your purchase price excluding GST is over $450,000.00

Example:

Say the builder is selling a new home for $250,000.00. The true selling price is $242,248.06. GST charged is $7,751.94 calculated under the assumption that the purchaser qualified for the NEW HOUSING REBATE. Since this is a NEW RESIDENTIAL rental PROPERTY, the NEW HOUSING REBATE does not apply. The new GST amounts will be as follows:

If you qualify for the GST NEW RESIDENTIAL RENTAL PROPERTY REBATE,

you get 100% of the rebate on new houses less than $350,000,

or partial rebates from $350,000.01 to $449,999.99.

Visit www.centax.ca to get a copy of the GST NEW RESIDENTIAL RENTAL PROPERTY REBATE FORM.