The 2009 Ontario Budget proposed a single-value added sales tax
("HST") to replace the current system of
federal Goods and Services Tax ("GST")
and the provincial Retail Sales Tax
("RST"). On June 19, 2009, the
Government of Ontario announced an enhanced new housing rebate
proposal and certain transitional rules designed to assist
taxpayers and businesses transition into the new HST regime.
Enhanced New Housing Rebate
The new housing rebate will be calculated as 75 per cent of the
provincial portion of the HST payable on the purchase of a new
home, up to a maximum of $24,000. New homes purchased as primary
residences across all price ranges will qualify for a maximum
rebate of $24,000.
The effect of the enhanced rebate will be to apply the
provincial portion of the HST at a rate of 2 per cent on the first
$400,000 of the purchase price of a new home and at a rate of 8 per
cent on the portion above $400,000.
The new housing rebate program will be available for
substantially renovated housing, owner-built housing, housing on
leased land, mobile homes and modular homes used as primary places
Transitional Rules for Residential Real Property
Transitional HST rules for residential real property have also
been proposed in order to help homebuyers and builders transition
to the new tax system. The new HST regime will subject
builders' sales of newly constructed or substantially renovated
homes to the HST where both ownership and possession of the home
are transferred after June 2010 (i.e. beginning July 1, 2010).
Builders of newly constructed or substantially renovated single
homes or residential condominiums who rent out such new homes or
condominiums and are required to pay GST on self-supply after June
2010 will also be required to pay the provincial portion of the HST
on self-supply. Similar rules will apply to new rental homes.
Sales of newly constructed or substantially renovated homes
under written agreements of purchase and sale entered into on or
before July 18, 2009, will be "grandparented" such that
these sales will not be subject to the provincial portion of the
HST even where both ownership and possession of the homes are
transferred after June 2010. Purchases of newly constructed or
substantially renovated single homes and condominium units for
residential rental will be grandparented if the agreement of
purchase and sale was entered into on or before June 18, 2009.
Newly constructed or substantially renovated homes built by owners
for their personal use, and mobile and modular homes will not be
Builders of grandparented newly constructed or substantially
renovated single detached, semi-detached and attached homes will be
required to pay a transitional tax adjustment where the home is
completed in full or in part after June 2010. The transitional tax
adjustment will be calculated on the total purchase price of the
home, as established for GST purposes, based on the extent of
construction or substantial renovation completed as of July 1,
2010. Builders of newly constructed or substantially renovated
residential condominiums will be required to remit a transitional
New homes subject to the provincial portion of the HST may be
eligible for a RST transitional housing rebate to provide relief in
respect of the RST already embedded in the home price. The
transitional rebate will be calculated as a proportion of the
estimated embedded RST in the home, based on the degree of
completion as of July 1, 2010. Eligible applicants will be
permitted to calculate the estimated embedded RST by choosing one
of two methods. Eligibility for the RST transitional housing rebate
will not be affected by a purchaser's or builder's ability
to claim the new housing or rental housing rebate.
This rebate will be available for non-grandparented single
homes, condominiums and traditional apartment buildings as well as
grandparented condominiums for which the transitional tax
adjustment would be payable. For newly constructed or substantially
renovated single detached homes, semi-detached homes, attached
homes or duplexes, the RST transitional housing rebate will be
available to individuals purchasing the home or to builders who
first rent the home after June 2010. The rebate is only available
where the HST will apply and not to grandparented homes. But for
newly constructed or substantially renovated homes that are
resident condominiums or traditional apartment buildings, the
transitional rebate will be available to the builder rather than
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The CRA provides new housing rebates for individuals who have purchased or built a new house or have substantially renovated a house or made a major addition to a house who plan on living in it personally or letting a relative live there.
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