When CRA Denies New Housing Rebate Claim: Sharma v The King , 2025 TCC 145

Overview: What is the New Housing Rebate?

In brief, the New Housing Rebate allows individuals to recover some of the Goods and Services Tax (GST) that was paid on the purchase of his or her new home. GST is a federal sales tax that would generally apply to the sale of a newly built home, and the person buying the property would be responsible for paying this tax. Provinces that have an agreement with the federal government for the CRA to administer and collect Harmonized Sales Tax (HST) may have a program that permits the remaining portion of the HST to be rebated. These provinces include:

This is significant as the combination of federal and, if applicable, provincial rebate would allow purchasers of eligible newly built homes to save significant amounts of money. However, the New Housing Rebate is not without its limits. The federal rebate for the GST is only applicable if the fair market value of the house is less than $450,000. This threshold has been increased to $1.5 million if the purchaser is a first-time home buyer and entered into an agreement of purchase and sale for a new or substantially renovated house on or after March 20, 2025, and before 2031 (FTHB GST/HST Rebate).

This GST rebate (which includes the federal part of the HST) is capped at $50,000. Originally, the GST rebate was limited to 36% of the GST or federal portion of HST and was phased out for houses with a fair market value between $350,000 and $450,000. The maximum amount of GST rebate that could be claimed was $6300.

In addition, the Ontario government implemented the “Ontario Enhanced New Housing Rebate (ENHR)” in 2026 that provides temporary relief of the full 8% (provincial portion) of the HST that applies to Ontario up to $80,000. This program is set to apply for a period of one year starting April 1, 2026, to March 31, 2027, for homes purchased from a builder between that period and owner-built homes where construction begins within that period. After the ENHR expires, the maximum claimable amount for the Ontario provincial portion of the rebate will revert back to $24,000.

With such an incentive to purchase new homes, it is imperative to understand the eligibility requirements and the potential issues that one may face when attempting to claim this rebate. Failure to meet the eligibility criteria may result in CRA tax reassessments, denied rebates and possibly tax court litigation.

The eligibility criteria found in the Excise Tax Act are rooted in the policy for the implementation of the rebate. Specifically, the objective of the rebate is to improve the housing market by making it financially less burdensome on homebuyers and making the purchase of a newly built home more desirable by providing a financial incentive. The eligibility requirements essentially only allow the rebate in circumstances where the claimant has a settled intention to use the new home as his or her primary place of residence or of a relation. Similarly, the person for whom the house will be a primary place of residence must factually occupy the home as a dwelling.

It follows that this rebate is not intended for people to purchase newly built properties and keep them vacant. In practice, the eligibility criteria that are found in the Excise Tax Act can lead taxpayers to believe that the rebate can easily be taken advantage of without following the rules. The related jurisprudence, such as the recent case of Sharma v The King, 2025 TCC 145, shows how the test for eligibility is nuanced and takes into account a multitude of factors. This article will discuss how eligibility is determined and the test that the Tax Court of Canada has provided.

How Do I Claim the New Housing Rebate?

The New Housing Rebate is claimed through filling out and filing the appropriate forms with the CRA.

For a home that is built by a builder, you do not need to send any documentation to the CRA if the builder pays or credits you with the amount of the rebate. If the builder does not do this, then Form GST190, Form RC7190-ON (for the Ontario new housing rebate), and a copy of your statement of adjustments will need to be sent to the CRA. If these forms and documents are not received by the CRA, then the rebate may be denied. The deadline for filing this is within two years from the day possession of the house was transferred to you. This is the day that you can hold, control or occupy the property.

How is Eligibility Determined?

The eligibility requirements for the federal and Ontario program are similar. If you are planning to utilize this rebate, the property that is being purchased must be eligible. Eligible properties include a detached or semi-detached home, a condo unit, and a townhouse. Moreover, the home must be newly built or substantially renovated to be eligible for the rebate. This includes owner-built homes where the house is constructed by yourself, or by a contractor, on land that you owned or leased. Further, the rebate can be claimed for non-residential property that is converted into your house.

Subsection 254(2) of the Excise Tax Act lists the criteria for eligibility. The list below summarizes the test for eligibility found in the Excise Tax Act:

• (a) A builder sells a single-unit home or a condo unit to an individual.
• (b) At the time the individual becomes liable (or assumes liability) under the purchase agreement — not at closing — they intend to use the unit as their own primary place of residence, or as that of a relation.
• (c) The total consideration for the unit (including any other taxable supply of an interest in it) is under $450,000.
• (d) The individual has paid all the GST/HST owing on the purchase, including on any other taxable supply of an interest in the unit.
• (e) Ownership transfers to the individual only after construction or substantial renovation is substantially complete.
• (f) Between substantial completion and the individual taking possession, the unit sits unoccupied — with a narrower exception for condo units: they can be occupied during that window only by a purchaser (or a purchaser’s relation) under a purchase agreement for that unit.
• (g) Either:
  • (i) the first person to occupy the unit after substantial completion is the individual (or their relation) for a single-unit home, or a purchaser (or a purchaser’s relation) for a condo unit; or
  • (ii) the individual instead sells the unit exempt of tax before anyone occupies it as a residence.

All of paragraphs (a) through (g) must be met for an individual to qualify for the rebate.

One of the most important requirements for the rebate is found in s.254(2)(b) of the Excise Tax Act. This provision requires that the purchaser have the intention to use the property as a primary place of residence for his or herself or their relative. The CRA has its own policy statement (GST/HST Policy Statement P-228) that describes how it determines a taxpayer’s primary place of residence. Some examples of factors that the CRA considers when making this determination are:

• Whether you consider the house as your main residence
• The length of time you inhabit the premises
• The designation of that address on personal and public records (i.e. mailing address, driver’s license, etc.)
• Mailing address
• Where that person votes
• The address on his or her income tax returns

The CRA will look to see if this intention is evidenced from the time that you purchased, constructed or substantially renovated the house. For greater clarity, this does not mean that the purchaser’s intention at the time of closing is relevant. Intention is considered at the point when the purchaser becomes liable or assumes liability under the agreement of purchase and sale, which can be months or years before the completion of the house. To further clarify, the home cannot be intended to be the primary place of residence at a future point in time, such as retirement.

Further, s.254(2)(g) requires the relative or the purchaser to occupy the unit as a place of residence. Moreover, s.254(2)(f) states that you or your relative must be the first to have occupied the property as a place of residence after construction was substantially completed.

To determine the quality of occupancy, the courts have looked at the following examples of factors:

• Electricity usage
• Where meals are cooked and eaten
• The amount and type of furniture that is moved to the property
• Where the individual sleeps

While there are other eligibility requirements that can be found in the Excise Tax Act, this article will focus on paragraphs 254(2)(b) and (g) as they were featured in the Tax Court of Canada’s decision in Sharma v The King, 2025 TCC 145.

Sharma v The King: Case Study on a Recent Tax Court Ruling on a Taxpayer’s Eligibility of the New Housing Rebate

Mandeep Sharma and her husband bought a newly built Guelph townhouse, their self-described “dream home”, choosing the area for Mr. Sharma’s work at a family food business on the University of Guelph campus and for their family ties there. The purchase closed December 1, 2015, and Mandeep, who’d been substituted in as purchaser in place of her husband to ease financing, claimed the GST/HST New Housing Rebate. Just seven weeks later, a promotion requiring her daily presence at Queen’s Park in Toronto, combined with the university ending its relationship with her husband’s business, made staying in Guelph unworkable.

She sold the property by February 2016. CRA denied the rebate, arguing the short ownership period showed the home was never truly intended as a primary residence — the issue that went to the Tax Court.

One of the pertinent issues that was part of the Tax Court of Canada’s analysis was whether the taxpayers purchased the property intending to use it as a primary place of residence (s.254(2)(b) of the Excise Tax Act). The determination of a taxpayer’s intentions to use property as a primary place of residence is based on the specific facts and circumstances of the taxpayer.

Factors, such as the time spent at the property, purchase of contents insurance, electricity usage, and personal and professional circumstances, were some of the factors that the Tax Court considered to determine the taxpayers’ intentions. Ultimately, the Tax Court found that the taxpayers had the requisite intention to acquire the property as a primary place of residence.

The second issue was whether the taxpayers occupied the home as a place of residence. The same facts are used to determine whether there was a sufficient level of occupation. Based on the facts, the taxpayers were able to show that they sufficiently occupied the home for the purposes of satisfying the requirement in s.254(2)(g).

What is the Difference Between s.254(2)(b) and s.254(2)(g)?

The Court in Sharma emphasized the distinction between s.254(2)(b) and s.254(2)(g) of the Excise Tax Act. The former requires the property to be acquired for use as the individual’s “primary place of residence”. The latter does not have this requirement and only uses the words “place of residence”. The Court’s discussion on paragraph (g) was centred on the absence of the modifier “primary” in front of “place of residence”.

In the discussion on the occupation of the property as a place of residence, two cases were cited: Sindhi and Gorgis. Sindhi v The Queen, 2023 TCC 102, is an example of how someone may be disqualified from claiming the rebate because he or she did not meet the test under s.254(2)(g). Specifically, not making meals at the residence and the fact that the individual continued to live with his parents, among other things, was evidence to show that he did not occupy the home as a place of residence.

In Gorgis v The King, 2024 TCC 109, the Tax Court found that the taxpayer was eligible for the rebate despite the fact that he often slept away from the property, did not have much furniture, often ate meals elsewhere and did not change his address on his driver’s license or CRA account. The reason for this was that his lifestyle explained his absences from the home: he worked as a tow truck driver and often slept in his truck, he had moved to the area to be near extended family, and the home held all of his personal belongings, with nothing kept elsewhere.

These factors explained why he was away from his home for a majority of the time. Thus, the duration that the individual stays in the house is not determinative of occupying the house as a place of residence. Therefore, to fulfil the requirement in s.254(2)(g), the taxpayer needs to show that they occupied the unit for the purpose of habitation. The examples of Sharma and Gorgis show that the nuance of the application of the test for occupation is in the lifestyles of the individual and not based on a bright-line test.

The Tax Court also rejected the CRA’s argument that relied on Gill v The Queen, 2016 TCC 13. In Gill, the requirement of occupancy was interpreted to be “more than passing” and requires an element of permanence. Effectively, the CRA’s argument was that the taxpayers’ occupation of the property lacked the element of permanence. This argument was rejected in Sindhi and also rejected in Sharma, as the statute does not state the extent to which one must occupy the house and requiring the element of permanence raises the bar for occupancy to a level greater than what is stated in the provision. Therefore, the level of occupation required in s.254(2)(g) is less than what is contemplated in s.254(2)(b) (primary place of residence).

In contrast, the Court in Kniazev v The Queen, 2019 TCC 58, elaborated on the concept of a “primary place of residence”. The main difference is that for the property to be considered as such, the taxpayer must have the “settled intention to centre or arrange his [or her] personal and family affairs around that property”. The Court explained that this was a higher threshold to meet in comparison to the concept of occupying the property as a place of residence. Thus, when claiming the rebate, there must be an intention on the part of the taxpayer to centre his or her life around the home, and when the home is ready to be moved into, that person must live there. The CRA explains this as the place that you intend to live in on a permanent basis.

“Unlike traditional CRA tax audits, in cases where the New Housing Rebate has been denied, the CRA is effectively looking into the lives of the claimants and determining that the level of occupation or intention did not meet a specific standard. The difference in these cases is that they are questioning how you live and whether your situation meets a certain standard for occupying a home. It is up to the taxpayer to point to evidence to support their contention that they did in fact intend and occupy the place of residence, which is highly invasive and will require you to divulge information that you otherwise might wish to keep private. Information, such as where you eat or how you use your electricity, is put under a microscope.” – David J. Rotfleisch, Certified Specialist in Taxation and Canadian tax lawyer.

Other Relevant Cases: Osagie v The King, 2025 TCC 114 and Lisi v The King, 2025 TCC 106

Osagie v The King and Lisi v The King are two other cases from 2025 that lend to the analysis of the New Housing Rebate’s eligibility requirements.

Osagie deals with the same provisions of the Excise Tax Act as Sharma, but the analysis is focused on whether a frustrating event occurred that prevented the individual from satisfying the conditions. In brief, the taxpayer and her family purchased a newly built home with the intention to use it as their primary place of residence. However, when the COVID-19 pandemic occurred, they were forced to rent their place to an unrelated third party to help with the costs of maintaining the mortgage while they lived elsewhere. The CRA denied the rebate, stating that they did not meet the intention and occupancy requirements.

“Frustration” can occur where unforeseen events make doing a certain act impossible or significantly different from what was originally intended. In the context of s.254(2), three requirements need to be met. First, the event must be unforeseeable. Second, the event must be beyond the control of the taxpayer. Finally, the event must result in the absence of real choice, making it impossible to live in the property.

In this case, the COVID-19 pandemic was cited as the reason why the individual was not able to meet the occupancy requirement in s.254(2)(g). While there were no lockdown restrictions that prevented them from moving, the taxpayer’s occupation as a nurse and her husband’s job in the healthcare industry as a front-line worker made it so that their move was frustrated. Specifically, the exposure to the virus made them and their children sick throughout the period of time when they would have moved.

Also, because of the illness, they worked less, so they had to get a tenant to occupy the newly built home so that they would be able to carry the two mortgages that they had. They eventually evicted the tenant so that they would be able to move in themselves. Ultimately, the Court found that the pandemic had frustrated their ability to move to the rebate property, which forced them not to be the first occupants.

In Lisi, the question was whether the two brothers had acquired their respective newly built homes for use as their primary place of residence (s.254(2)(b)). The CRA assessed them and denied the New Housing Rebate that they claimed. The reason for this is that they sold their homes within months of the purchase. However, the evidence showed that the two brothers had the intention of living at the newly built properties, but their life circumstances made it difficult for them to live there. One brother lived at the home with his girlfriend for 6 months, and the other lived at his home for only 3 months.

One brother explained that he was an addict, and the reason for wanting to live in his own home was to be able to indulge in his addictions in private. His addictions made it so that he was unable to move in and incapable of living alone. As such, the house was sold a few months after moving in. This case exemplifies that short ownership and imperfect occupancy are not fatal where the evidence is credible.

Strategic Takeaways: Eligibility Criteria are Intertwined and Considerations are Not Always Determinative

The New Housing Rebate is a rebate for homebuyers who wish to minimize the costs of acquiring a new home. The case of Sharma provides key takeaways for ensuring that your claim for the rebate is not denied. One of the main takeaways is that the requirements in s.254(2)(b) and s.254(2)(g) are intertwined, but distinct. Sharma exemplifies the court’s approach to determining issues of eligibility for the New Housing Rebate. Specifically, it illustrates that the test is fact-specific, subjective, and based on a non-exhaustive list of factors.

For example, the CRA looks to the duration of the length of stay at the home as a factor, but in Sharma and related cases it was found that this factor is not determinative and someone can be eligible even if they rarely stayed at the home. On the other hand, this also shows that the CRA may challenge the claim if the facts are inconsistent with occupying a residence or intending to own property as a primary place of residence. Taxpayers should seek advice from an experienced Canadian tax lawyer if the CRA denies the rebate or issues an assessment.

Pro Tax Tip: Thorough Documentation Recommended and Examples of Documents to Retain

Both s.254(2)(b) and s.254(2)(g) must be met to be eligible for the rebate. In the cases noted above, the taxpayers were helped by their recollection of events and corroborating documentation. While not absolutely necessary in every scenario, it is always helpful to have physical and direct evidence to support your version of the events. For example, to show moving costs and the items moved to the new home, the taxpayer in Sharma attempted to reconstruct an invoice for moving expenses after it had been lost, which was not accepted as evidence.

The lesson to learn is that the test for eligibility for the New Housing Rebate is highly fact-specific, and solely relying on testimony may be detrimental to your case if it gets to the point of appealing to the Tax Court. Therefore, having a well-documented record of your move, reasons for moving, and how the house was occupied after the acquisition will be crucial.

• Below is an example of records that should be preserved to help you in case the CRA denies your claim:
• Moving invoices
• Description of items moved into the new home
• Utility bills
• Records of insurance policies taken out on the property and its contents
• Records of address changes to the new home
• Changes to mailing address to the new home
• Employment or school records that show you moved closer to work or school or you commuted a reasonable distance

As mentioned above, having one or some of these records will not guarantee that your claim will not be denied. As David J. Rotfleisch observes: “Missing some of these records will not be absolutely fatal to your claim. The relevance of these records will depend on your circumstances. In tax litigation, a person’s credibility is important to their testimony, but it can be further bolstered by direct evidence. Contact an experienced Canadian tax lawyer to discuss what records you may need to collect if you are anticipating or are in the process of tax litigation.”

FAQs: Other rebates, Interaction with Other Income Tax Provisions, Who May Occupy the Place of Residence

Are there any rebates available for purchasing newly built rental properties?

Another version of the New Housing Rebate is available to purchasers of newly built rental properties. This rebate is called the New Residential Rental Property Rebate. Unlike the New Housing Rebate, this rebate is found in section 256.2 of the Excise Tax Act and is available to a landlord who purchases a newly constructed or substantially renovated residential rental property, or who constructs a rental property and has to account for GST/HST under the self-supply rules. The rebate is paid to the person who actually paid the GST/HST, and the rental housing or land must be intended for long-term use as a residence.

The eligibility conditions differ in a way that matters. There is no requirement that anyone occupy the unit as a primary place of residence, so the intention and occupancy tests discussed above do not apply to a landlord. Instead, the fair market value of the qualifying residential unit must be less than $450,000 at the time the tax became payable on the purchase or self-supply, and less than $112,500 for land or a site in a residential trailer park. Because that ceiling is measured by fair market value rather than by the consideration actually paid, a landlord who negotiates a purchase price below the limit can still fall outside the rebate if the value of the unit is higher at the relevant time.

Landlords of purpose-built rental housing should also review the enhanced GST rental rebate, which increases the rebate on qualifying new purpose-built rental housing from 36 percent to 100 percent and removes the former phase-out thresholds. The claim is made on Form GST524, and the CRA sets out the administrative rules in Guide RC4231. A landlord who is unsure which of the two rebates applies should speak with an experienced Canadian tax lawyer before closing, because a single unit cannot support both claims.

What if I am buying the home for my child, will I still be eligible?

The Excise Tax Act allows you to purchase a home for a “relation”. A relation is defined as someone who is related to you or who is a former spouse or common-law partner. This means that if you are the purchaser of the home, your child may occupy the home. The same requirements in s.254(2)(b) and s.254(2)(g) apply, and you must have the intention of having the home as the primary residence of your child and your child must occupy the home as a place of residence.

Who exactly qualifies as my “relation”?

The CRA explains that a relation is an “individual who is related by blood, marriage, common law partnership or adoption within the meaning of the Income Tax Act.” The provision of the Income Tax Act referred to by the CRA is s.251(6). This is a broad definition and includes almost all people to whom a person may be related. It includes blood relationships, marriage, relationships through marriage, common-law partnership, and adoption. Hypothetically, a child may also purchase a newly built home for the purpose of a parent (or even parent-in-law) residing in the property as his or her primary place of residence.

Importantly, in terms of familial relationships, only children, other descendants, parents, and siblings are included. This means that uncles and aunts are excluded and would not be a relation for the purposes of the rebate.

Is my primary place of residence the same as my principal residence?

Your primary place of residence may not necessarily be the same place that you designated as your principal residence. The CRA states that it is possible for an individual to own more than one place of residence and continue to occupy both, but only one may be your primary place of residence. What this means is that you can own multiple residences, and as long as the home that you are claiming the rebate for is the place where you intend to live on a permanent basis, having multiple homes will not disqualify you.

Relatedly, you may own multiple properties but may only designate one as your principal residence for the purposes of claiming the principal residence exemption. The CRA’s guidance on the rebate does not state that your primary residence needs to be your principal residence as well. As such, while for most people these two will be the same property, it is entirely possible to designate one property as a principal residence and still be able to claim the rebate on the purchase of another property.

What can I do if the rebate is denied but I believe I am eligible?

If the CRA decides to deny the rebate, you will receive a notice of assessment. From the date that the notice was mailed, you will have 90 days to file a notice of objection. If you are unsuccessful at this stage, then a further review can be brought to the Tax Court through a notice of appeal. The appeal to the Tax Court must be made within 90 days after the CRA issues a notice of reassessment or notice of confirmation. These are complicated legal proceedings, and an experienced Canadian tax lawyer can help you through this process.

Is the rebate only available to individuals?

The New Housing Rebate is only available to individuals. This means that corporations or partnerships are not able to claim the rebate. This aligns with the purpose of the rebate, as corporations or partnerships would not be able to physically live in the new home. The other reason is that corporations and partnerships may end up purchasing these units and keeping them vacant as investment properties or as corporate rental properties. This would go against the objective of the rebate to provide a pathway for individuals for home ownership and would exacerbate the issues in the housing market in Canada.

What would count as a substantial renovation for the purposes of the rebate?

A substantial renovation is a major renovation. This requires 90% or more of the interior of the building to be removed or replaced. Only livable areas will count, which include basements and attics. However, completing a basement but not making it a livable space will not count. To meet the 90% or more requirement, the CRA accepts any fair and reasonable method.

Typically, it is based on the square footage of your home and the square footage of the renovated areas. This is important because homeowners may renovate a home to increase its value. However, if that house was substantially renovated, GST/HST may be payable on the sale of the home. Therefore, it is important to understand how the extent of your renovation will affect your tax obligations.

Do I pay GST/HST on every purchase of a home?

GST/HST is only payable on newly constructed or substantially renovated homes. The purchase of a resale home is not subject to GST/HST. This is because most sales of previously occupied residential housing are exempt supplies. As such, the GST/HST rebate is specific to newly built and substantially renovated homes. In other words, the rebate will not apply to a sale of a resale residential home.

Furthermore, the rebate does not provide a full exemption from all taxation. For example, in Ontario, land transfer tax will still apply even if the rebate is claimed. Other rebates may be available, but these are distinct from the GST/HST New Housing Rebate.

Does selling the home shortly after closing automatically disqualify me?

Selling your home shortly after closing may not automatically disqualify you from being eligible for the rebate. However, the CRA may still deny your claim for the rebate on this basis. This is related to the intention of using the property as your primary place of residence. Logically, one cannot intend to live at a home primarily if one sells it shortly after moving in. However, the example above of Lisi v The King demonstrates how certain circumstances may not disqualify you just based on a short period of ownership. What helped the taxpayers in Lisi was evidence of their intention to live in the newly built homes as their primary place of residence. Even though they sold the home within months of closing, they were able to show how their personal life circumstances led to the short period of ownership. Therefore, selling your home shortly after closing may raise red flags for the CRA, but is not necessarily determinative of your eligibility for the rebate.

What if I could not move in on time because of circumstances beyond my control?

If you could not move into your home because of circumstances beyond your control, you may still be eligible for the rebate. The reason for this is that you, or the relative that is meant to move in, must be the first to occupy the premises. The rule related to occupation does not specifically require you to move into the house immediately after closing.

However, if you do not move in following closing, then this will raise suspicions for the CRA, as not moving in shows a lack of intention to live at the home as your primary place of residence. Osagie v The King is a good example of how events may frustrate the process of moving in such that it would be impossible. For example, if a natural disaster makes it impossible to physically move to the home for a long period of time and the burden of paying the mortgage is too onerous and you resort to getting a tenant, then you may still be eligible for the rebate if you still meet all other requirements.

For “frustration” to apply, there are three requirements that must be met. First, the event must be unforeseeable. Second, the event must be beyond the control of the taxpayer. Finally, the event results in the absence of real choice, making it impossible to live in the property.

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.