In Ontario, the purchase of a new (or substantially renovated)
house or condominium (collectively a
"Home") is subject to Harmonized Sales
Tax ("HST"). However, a new Home buyer
may be entitled to claim a rebate in respect of some portion of the
federal and provincial portions of the HST (the "New
Home Rebate"), which rebate will often be worth tens
of thousands of dollars for new Home buyers.
Generally, an eligible new Home buyer can claim a rebate for 36% of
the federal portion (5%) of the HST paid on a new Home with
a pre-tax price less than or equal to $350,000. Where the
pre-tax price is more than $350,000, but less than $450,000, the
rebate for the federal portion of the HST is gradually clawed back
and no rebate is available where the purchase price is more than
$450,000. The maximum rebate for the federal portion of the HST is
In addition, an eligible new Home buyer can also claim a rebate of
75% of the Ontario portion (8%) of the HST. Although this rebate is
available for all Homes, regardless of their purchase price, it is
capped at a maximum rebate of $24,000.
Typically, the New Home Rebate is assigned to the builder of the
new Home, who credits the buyer with the amount of the rebate, if
available, so that the buyer does not need to pay the full amount
of HST at closing.
Potential Traps for the Unwary
While the New Home Rebate provides significant HST relief to
many new Home buyers, buyers need to be aware that the New Home
Rebate is not always available to them. Furthermore, unless they
satisfy the detailed eligibility criteria, they may not be entitled
to claim the New Home Rebate, resulting in a surprise HST bill at
closing if the builder refuses to credit the buyer with the amount
of the rebate. Otherwise, if the buyer's rebate claim is
subsequently challenged by the CRA, they could be assessed by the
Canada Revenue Agency not only for the amount of the disallowed
rebate, but also for potential interest and penalties
Although a detailed review of the eligibility criteria for the New
Home Rebate is beyond the scope of this article, the following are
common situations where a new Home buyer may not be eligible for
the New Home rebate:
(a) The buyer has purchased the Home with the intention of
(b) The buyer purchases the Home to use as a rental property;
(c) Someone other than the buyer, or a "relation" of the
buyer (including parents, grandparents, children, grandchildren,
spouses and siblings, but not uncles, aunts nieces, nephews and
cousins), first occupies the Home; and
(d) Title to the home is put in the name of someone other than the
buyer (often where a lender requires a third-party co-signer for a
mortgage, they will also insist that such third party be added to
the title of the Home).
In some cases, where the New Home Rebate is not available, the
buyer may be entitled to claim a different rebate. For example, a
buyer who buys a Home as a rental property may be entitled to claim
a similar landlord rebate for new residential properties, although
they will typically be required to pay the full amount of the HST
at closing and claim a rebate directly from the CRA.
In any event, before buying a new Home, buyers should consult with
their advisors to ensure that they will be eligible for the New
1 In this case, buyers
should also be alert to the income tax implications of the purchase
and sale of their Home.
The foregoing provides only an overview and does not
constitute legal advice. Readers are cautioned against making any
decisions based on this material alone. Rather, specific legal
advice should be obtained.
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