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The Ontario Government has announced its intention to extend the Federal Government's previously announced GST relief for first-time home buyers to the Ontario as part of the HST.
The existing residential rebates for GST and HST
All sales of new residential real property and substantially renovated residential real property are subject to the 5% GST and the 8% Ontario part of the HST. However, both of these are subject to existing rebates under the Excise Tax Act (Canada) (the "Act").
The 5% GST is potentially subject to a rebate of 36% (which is equivalent to 1.8 of the 5% GST). However, this existing rebate is subject to a linear reduction for a purchase price between $350,000 and $450,000. As much housing is now sold for prices above $450,000, this rebate is frequently not available.
The 8% provincial part of the HST is potentially subject to a rebate of 75% (which is equivalent to 6 of the 8% provincial part of the HST). This existing rebate is not subject to a reduction based on the purchase price, but is subject to a cap of $24,000 that is reached at a purchase price of $400,000.
The new residential rebates for GST and HST
On May 27, 2025, the Federal Government announced its intention to amend the Act to introduce a new rebate just for first-time home buyers (the "New Federal Rebate"), allowing qualifying buyers to save up to $50,000 on the purchase of a new home. The New Federal Rebate will rebate 100% of the 5% GST up to a purchase price of $1 million, subject to a linear reduction for a purchase price between $1 million and $1.5 million.
On October 28, 2025, the Ontario Government announced its intention to request the Federal Government also amend the Act to introduce a new rebate for first-time home buyers in Ontario (the "New Ontario Rebate"), allowing qualifying buyers to save up to another $80,000 on the purchase of a new home. The Ontario Government intends the New Ontario Rebate to apply from the announcement date for the New Federal Rebate. Once implemented, the New Ontario Rebate will rebate 100% of the 8% Ontario part of the HST up to a purchase price of $1 million, subject to the same linear reduction for a purchase price between $1 million and $1.5 million.
As the existing Ontario rebate will remain available to a maximum amount of $24,000, the existing rebate will provide a minimum rebate for first-time home buyers. As a result, for a purchase price over $1.35 million, where the New Ontario Rebate would be below $24,000, the existing rebate will maintain a rebate 'floor' of $24,000.
Together, the Federal and Provincial Government's proposals will allow for savings of up to $130,000.
Who qualifies as a "first-time home buyer"
To qualify as a first-time home buyer, the buyer must be an individual of at least 18 years of age, and they must be a Canadian citizen or permanent resident. The buyer also must be acquiring the home for use as their primary place of residence and, therefore, not for rental.
In addition, the buyer cannot have lived in a home that they or their spouse or common-law partner owned or jointly owned as a primary residence in the calendar year of the purchase or in any of the previous four calendar years. For example, if an individual takes ownership in 2025, they must not have owned a primary residence in any of 2021 to 2025.
In addition, each individual can claim the first-time home buyer's rebate only once in their lifetime. The individual is not eligible if their spouse or common-law partner has already claimed the rebate.
The individual must qualify as a first-time home buyer at the relevant time of acquisition or occupancy. For a home purchased from a builder, the buyer must qualify on the date ownership transfers. For owner-built homes, the buyer must qualify on the earlier of the date of first occupancy or the date of substantial completion.
First-time home buyers may also be eligible if they buy shares in a cooperative housing corporation that entitle them to occupy a newly build or substantially renovated co-op unit as their primary residence, or build or substantially renovate a home that they were not previously living in for use as a primary residence.
Effective dates and coverage
Currently, the Ontario Government is coordinating with the Federal Government to align the New Ontario Rebate with the New Federal Rebate under Bill C-4. While the Ontario Government announcement suggested further details would be provided in the Federal Government Budget, none were included.
Once implemented, both rebates would apply to homes with agreements of purchase and sale entered on or after May 27, 2025, but before 2031. Construction must begin before 2031 and homes must be substantially completed and have ownership transferred before 2036.
If an agreement of purchase and sale is entered into before May 27, 2025, a variation, alteration, assignment, or a re-execution through a new agreement will continue to be considered as entered into before May 27, 2025.
Purchases before Royal Assent
Individuals who purchase a new home from a builder and ownership of the home is transferred before Royal Assent is received will need to pay the GST/HST to the builder, and apply directly to the CRA for the New Federal Rebate and the New Ontario Rebate. Builders cannot credit these new rebates to individuals for homes where ownership was transferred before Royal Assent is received. However, a builder can credit the existing rebates in the interim.
Conclusion
The New Federal Rebate and New Ontario Rebate are significant enough to make new home purchases much more affordable for first-time home buyers and will benefit buildings going to market.
New home builders should revisit their purchase and sale agreements to ensure purchasers qualify for the rebate at the time of entering into the agreement of purchase and sale, and again when occupancy occurs. New home builders should confirm these qualifications by way of declarations obtained from purchasers.
Read the original article on GowlingWLG.com
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