HST New Housing Rebate – What New Homebuyers Should Know

By of Merovitz Potechin LLP on Wednesday October 30, 2019.

In Ontario, the sale of newly built homes is subject to GST/HST. This means that anyone in Ontario who purchases a new home from a builder is required to pay HST/GST on their purchase.

The GST/HST New Housing Rebate (the “Rebate”) was introduced to help homeowners deal with the cost of buying a new home. Provided a purchaser meets certain criteria, he/she may be entitled to offset up to $24,000 of the provincial taxes, and up to $6000 of the federal taxes paid on closing.

To avoid last-minute surprises, both new home builders and new home purchasers in Ontario should be cognizant of the eligibility requirements for the Rebate prior to entering into an agreement of purchase and sale for a newly built home. 

Who is eligible for the Rebate?

Purchasers should keep the following in mind when determining their eligibility for the Rebate:

• The Rebate only applies to newly constructed or substantially renovated houses. The term “substantially renovated” typically entails a building where 90% or more of the interior area has been renovated.

• The property must be a qualifying “house”. This can include a detached or semi-detached single-unit house, a duplex, a condominium unit, a townhouse, a co-op housing unit, a mobile home, and a floating home.

• The purchaser must be buying the home as his/her primary place of residence or that of their immediate family. Various factors will be considered by the CRA when determining if a house consists of a person’s primary place of residence. At the very least, a purchaser should live in the house during the majority of the year and there should be clear signs that the purchaser has made the house his/her primary place of abode (i.e. the residence’s address is used for mailing purposes on government-issued records, utility bills, tax returns, driver’s licence, etc.).

For a further listing of requirements to qualify for the new housing rebate in Ontario, click here.

How do you apply for the Rebate?

In most cases, the purchase price charged by a builder on a newly built home already includes the HST/GST payable on the sale. This is premised on the purchaser qualifying for the Rebate and assigning it to the builder. Practically speaking, this means that when a qualifying purchaser meets with his real estate lawyer, he/she can expect to complete the prescribed rebate form and to swear a statutory declaration declaring that the home will be used as the purchaser’s primary place of residence. This documentation is then forwarded to the builder who subsequently completes the necessary filings to claim the Rebate.

What happens if you don’t qualify for the Rebate?

If a purchaser is not eligible for the Rebate, then HST/GST will be charged by the builder on top of the stated purchase price. For a purchaser, this means coming up with additional funds on closing.

Rebate for Investors – New Residential Rental Property Rebate

Where a purchaser does not qualify for the Rebate, other potential relief such as the New Residential Rental Property Rebate (the “Rental Rebate”) may be available to recover a portion of the HST/GST paid on closing.

The Rental Rebate applies when a new home is purchased with the intent that it will be leased for a continuous period at least one year immediately after closing. Unlike the New Housing Rebate, the Rental Rebate cannot be assigned to the builder.

To claim the Rental Rebate, an eligible purchaser will need to complete the prescribed rebate form and file it with the CRA along with a copy of their agreement of purchase and sale and lease. The Rental Rebate can be claimed up to two years after closing. 

Ensure that you qualify for the new housing rebate

When purchasing a new build in Ontario, always consult with your real estate lawyer to ensure that you qualify for the rebate. If you are a first-time homebuyer looking to claim the rebate and have questions regarding your eligibility, contact real estate lawyer Frank Bourgault at Merovitz Potechin LLP.