No rebate for an owner who did not build a home as his primary place of residence
In May 2025, the Tax Court of Canada issued the judgment in Charlebois v HMK, 2025 TCC 76, denying the taxpayer's appeal of the CRA's denial of the GST/HST New Housing Rebate for an owner-built home applied for 2023.
The Tax Court found that the taxpayer, based on his conduct, did not build the home to be his primary place of residence and that there was no evidence he was the first individual occupying the home. Therefore, his appeal of the CRA's denial of the rebate application was dismissed.
GST/HST New Housing Rebate for owner-built homes
The GST/HST New Housing Rebate for owner-built homes is available under the Excise Tax Act to an individual homeowner who built his or her own home to claim part of the GST/HST paid on the newly constructed home.
The rebate is 36% of the GST paid or the federal portion of the HST paid, up to a maximum of $6,300. It is fully available to homes worth up to $350,000 and is phased out gradually when the value of the home reaches $450,000. The homeowners can claim the rebate by submitting an application within two years after the home is occupied or the construction is substantially completed.
Conditions for qualifications
Among the conditions to be qualified for the rebate, the individual owner must build the new home with the intention or purpose of using the new home as his or her primary place of residence and must be the first individual occupying the new home. The Tax Court found that the taxpayer failed to satisfy both conditions in this case.
The determination is highly fact-driven. As such, it is important for the court to understand who the taxpayer is. In this case, the taxpayer is an experienced real estate broker who ran his own incorporated real estate agency business. At the time of building the new home and later applying for the rebate, the taxpayer owned two properties, including the property at issue, and his real estate agency corporation owned two other properties, all in Ottawa.
The property at issue, after the rebate application, was transferred to another corporation of the taxpayer. The property, after the transfer, was converted from a duplex to a triplex.
While not being material in the decision, it is worth noting that the rebate is only to a "single unit residential complex," which is defined as containing not more than two residential units (a.k.a. a duplex). Thus, for a builder to take advantage of the rebate, the rebate must be applied for first before it can be converted into something more than a duplex.
The Tax Court reiterated that the CRA can make assumptions that the home is not qualified for the rebate, and it is the taxpayer's burden to refute the assumptions on the balance of probabilities.
Intention to use as the primary place of residence
The first condition to be examined is whether the owner built the new home for use as his or her primary place of residence. There is no definition for primary place of residence in the Excise Tax Act, so it is necessary to look to the jurisprudence.
The Tax Court explained that this is a question of fact and that while the wording calls for a subjective examination of intention or purpose, whether the homeowner built the home for use as his or her primary place of residence, the objective examination of the taxpayer's conduct is more revealing. A non-exhaustive list of factors includes:
- A change of address to the new home;
- Relocation of sufficient personal effects to the new home;
- Occupant insurance coverage (as opposed to rental or seasonal coverage);
- In the case of dual occupancy, the new home must be more frequently occupied, more convenient for work and amenities, and more suitable to the taxpayer's needs; and
- In the case of no occupancy, there must be evidence of frustration of establishing occupancy.
In the case at bar, the taxpayer claimed, and was not challenged, that he moved by himself a couch and a mattress from his previous home to the new home to sleep there on the date the occupancy permit was issued by the city in January 2021.
The taxpayer claimed that was all he needed because he "lived small", to which the Tax Court questioned as to why he built a duplex, consisting of a separate basement unit and a two-storey unit of 3,100 square feet (excluding the basement), in the first place.
More telling is that the base unit and the main unit were built as self-contained units with separate entrances and separate utility connections and meters.
On the date the occupancy permit was issued in January 2021, the taxpayer posted an advertisement to rent out the two-story unit on the main and second floors, using photos taken by a professional photographer. In the ad, the basement was said to be owner-occupied. At the time, the basement was still being finished.
In March 2021, the taxpayer applied for a mortgage for the home. Due to COVID, the appraiser from the bank only observed the exterior of the home and used the photos and description of the interior provided by the taxpayer.
The home was said to consist of a rental two-story unit and an owner-occupied basement unit. According to the judge, the photos of the basement unit in the appraisal report appeared clean and not lived in.
In April 2021, the basement unit was completed.
In September 2021, the taxpayer posted an advertisement to rent out the basement unit. According to the judge, the furniture in the photos of the basement unit in the ad appeared to be staging furniture, i.e. not lived in.
The basement was rented out in October 2021. The main unit was rented out in April 2022. Finally, the home was transferred to the taxpayer's corporation in June 2022.
Furthermore, the property at issue is inconveniently located 30 kilometres away from his real estate business office in downtown Ottawa, which was owned by his real estate broker firm. The taxpayer also did not provide evidence of insurance coverage for the home.
Taking everything together, especially how the home was constructed and the conduct of the taxpayer in actively promoting the home as a rental as soon as the occupancy permit was granted, the Tax Court found that the home was not built with the intention or purpose to be used as the homeowner's primary place of residence.
To refute the CRA's assumption, the taxpayer presented an email exchange with his lawyer regarding the purchase of the land plot to build the home. In the email, the taxpayer mentioned that he bought the land to build his own home as his primary place of residence.
The judge gave little credibility to this evidence because the email exchange was heavily redacted by the taxpayer, and in the little unredacted part, the taxpayer, as an experienced real estate broker, showed exactly what he needed to say.
The owner is to first occupy the home
The second condition to be examined is that the owner, or someone related to him or her, was the first individual to occupy the home. The basement unit did not look lived in, according to the judge, based on the photos of the basement unit. The taxpayer also did not provide evidence of an internet connection for the home.
To refute the CRA's assumption, the taxpayer presented one single Uber Eats delivery receipt on the day the basement unit was finished, one photo of the garage door, one screenshot of a running app for an outdoor run around the area, and one photo of the taxpayer standing with a bicycle in the garage.
The Tax Court found that a single Uber Eats delivery is simply insufficient to establish occupancy, especially during COVID. As for the photos, the Tax Court could only conclude that the taxpayer went for a run and cycled in the area, not that the taxpayer lived in the property.
The Tax Court reiterated that there needs to be a pattern of living in a place, to centre or arrange the individual's personal affairs around that place, in order to establish occupancy. Spending a few nights on a mattress in a place is not living there.
Overall, the Tax Court found that the taxpayer had not refuted the CRA's assumption of non-owner occupancy on the balance of probabilities.
Pro Tax Tip – Intention is more than words, and occupancy is more than spending a few nights on a mattress
The Tax Court decided that the taxpayer in this case had failed to establish his intention or purpose to use the newly built home as his primary place of residence and failed to establish his occupancy of the property.
This case is a reminder of the conditions for the GST/HST New Housing Rebate. Objective manifestations through the taxpayer's conduct in constructing and occupying the home are more revealing than subjective manifestations through the taxpayer's mere words of intending to use the home as the primary place of residence. Also, occupying or living in a place is more than sleeping a few nights in that place; it requires an individual to establish a pattern of living in the place.
This case concerns only two conditions, but there are other conditions for the GST/HST New Housing Rebate. Determination of a condition is sometimes not straightforward, calling for an examination of the relevant facts. Therefore, homeowners are advised to consult with experienced Canadian tax lawyers to ensure they meet all the conditions for the rebate.
FAQ
I expressly intended to build the home as my primary place of residence, but I later rented the home out. Am I disqualified for the rebate?
Renting the home out does not, by itself, disqualify the homeowner from the GST/HST New Housing Rebate. Likewise, having an express intention to build the home as the primary place of residence does not by itself qualify the homeowner for the rebate. Facts have to be examined holistically.
For example, if the homeowner's conduct shows that he or she has planned all along to rent the property out and execute that plan as soon as practicable, the odds are that the property may not be found to be for use as the homeowner's primary place of residence. Homeowners should consult with experienced Canadian tax lawyers for their particular situations.
I was the first individual to occupy my newly built home, but I didn't really document my occupancy. Am I disqualified for the rebate?
The GST/HST New Housing Rebate requires the homeowner, or someone related to the homeowner, to be the first individual to occupy the newly built home. Therefore, the homeowner should document the occupancy properly when applying for the rebate.
The evidence can be utilities subscribed for the property, occupancy insurance coverage for the property, sufficient personal effects of the occupant at the property, photographic evidence of living in the property, etc.
The list of evidence is not exhaustive, but the evidence as a whole should be convincing that one actually established a pattern of living in the property rather than fleetingly treating the property as a transient bedding. Homeowners should consult with experienced Canadian tax lawyers for their particular situations.