New Housing Rebates – GST/HST Refunds – A Toronto Tax Lawyer Analysis
The Canada Revenue Agency (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. The house must have a fair market value of less than $450,000 in order to the new housing rebates to be available. The exact amount an individual can receive is subject to the market value of the house and the amount of GST/HST paid.
HST New Housing Rebate
If the house has a fair market value of $350,000 or less, then a federal rebate of the lesser of $6,300 or 36% of the GST/HST paid is available. As the fair market value of the house increases from $350,000 to $450,000, the amount of rebate available decreases, and houses sold for over $450,000 are not eligible for the rebate. In the case of substantial renovations, major additions, and conversions, the $450,000 limit still applies, but is calculated as the fair market value of the property (house and land) at the time the work done on the house is substantially completed. It can be complicated trying to determine if a rebate is available and for how much, but our Toronto Tax Lawyers can guide you through the process. If the house is in Ontario or Nova Scotia, a provincial new housing rebate may also be available.
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Individual or Relation’s Primary Place of Residence to be Eligible for New Housing Rebate
For the purposes of the new housing rebates, an individual means only a human being, and a relation is someone who is connected to the individual by blood, marriage/common law spouse, or adoption - meaning that the new housing rebate is only available for actual people, and not corporations or trusts. Additionally, the new house must be for the use of an individual or relation as a primary place of residence. A primary place of residence is one that the individual owns, wholly or jointly, which the individual or relation intends to live in on a permanent basis. While someone might have multiple residences, each individual can only have one primary residence at any given point in time.
Notably, only the intent at the time of the signing of the agreement for the house to be a primary residence is necessary, and the individual or relation does not necessarily have to actually use it as a primary residence. This means that if you entered into an agreement to buy a new house and intended to use it as your primary residence at that time, you may be eligible for the new housing rebate even if you end up renting it instead of living in it after you gain possession of the house. On the other hand, if you intended to rent it out from the start, you may not be eligible for the new housing rebate even if you do end up living in the house as your primary residence. If you are thinking of purchasing or building a new house or have already and want to make sure your house qualifies for the new housing rebate, our Top Toronto Tax Law Firm can make sure everything is done right.
Substantial Renovations for New Housing GST/HST Rebate
Even if the house is not newly built, a substantial renovation can also qualify for the new housing rebate. In order for it to be considered a substantial renovation, 90% of the interior of an existing house must be removed or replaced. This does not include such items as the foundation, exterior and interior supporting walls, roofs, floors, or any staircases – those do not need to be replaced or removed to meet the test. However, if an individual does meet the test, any GST/HST paid when renovating the foundation, supporting walls, roofs, floors, and staircases are eligible for the rebate.
GST New Housing Rebate
In order to calculate the 90% replacement number, any fair and reasonable method can be used. For example, one might compare the square metres of renovated liveable floor space to total liveable floor space or one could compare the square metres of the floor and wall space of the renovated areas to the total floor and wall space of the house. Keep in mind, only liveable space can be included in these calculations – that means that sunrooms, patios, crawl spaces, garages, and unfinished basements do not count. But, like the roofs and walls, if an individual meets the test, GST/HST paid renovating these non-liveable areas are also eligible for the new housing rebate. Differences in calculating the liveable area and how much was renovated can be the deciding factor on whether or not a renovation qualifies for the rebate. Our experienced and professional Toronto Tax Lawyers can help find what method works best for you and give you advice from start to end.
Major additions to your house can also qualify you for the new housing rebate. A major addition must be so great such that the result is viewed as essentially a newly built house. As such, a major addition should at least double the total liveable area of a house. For example, the addition of a full second story to a bungalow would generally suffice.
Conversion from Commercial Building to Residential
If an individual purchases a property that was being held for non-residential use and then uses it as their primary residence, then the GST/HST paid for the purchase and improvements are eligible for the ontario new housing rebate. When this type of conversion takes place, any improvements or renovations made to convert the building to a residential building will be eligible, even if they do not meet the substantial renovation standard. Furthermore, this works even if an individual owned the non-residential use property in the first place and decides to change it into a residential property – the CRA considers this change to be the same as if the individual sold and repurchased the property, meaning GST/HST are charged, but if the other conditions are met, this would also be eligible for a GST/HST new housing rebate.
Improperly Claimed New Housing Rebates – CRA Voluntary Disclosure (VDP)
The rules regarding the new housing rebates can be confusing and complicated. There are requirements on how much the property is worth, what it is going to be used for, and who is going to use it – it even matters in what province the property is located. As such, it is natural that taxpayers can sometimes mistakenly claim a rebate when they do not apply. Remember, even if the CRA grants a rebate, that does not necessarily mean the rebate was properly claimed, nor does it mean that the property was eligible. If the CRA notices that there was a mistake in claiming the rebate, even if they already granted it, you can be reassessed and there can be significant tax penalties, and even imprisonment if you are charged with tax evasion. If you suspect that you may have improperly claimed a new housing rebate, do not panic – if the CRA has not yet contacted you about it, you can make a CRA voluntary disclosure (VDP or tax amnesty). If a voluntary disclosure is done properly and is accepted, all penalties will be waived and the CRA may also reduce the interest on the amount owed. Whether or not the CRA have contacted you yet, if you are not sure your rebate was claimed properly, speak to one our Toronto Tax Lawyers and we can help rectify any mistakes through a voluntary disclosure before they get any worse.
Deadlines to Apply for a New Housing Rebate
The new housing rebates can mean a significant amount of money saved on taxes when purchasing a new house or making significant renovations or additions but the rules can be tricky. The CRA gives you two years to apply for the rebate after you have purchased your new house or after the renovations or additions are substantially completed. If you are thinking of purchasing a new house or renovating, or have even already finished doing so, you could be eligible for the new housing rebate, but make sure you are doing it right and speak to one of our expert Toronto Tax Lawyers.
How do I apply for a new home GST rebate?
To apply for a new home GST rebate, go to the Canada.ca website and fill out the form that is appropriate to your situation. You must provide all of the information asked for. For some types of GST rebate, you will also need to provide an invoice and a copy of the statement of adjustments. Plus, at a later date, you could be asked to prove occupancy and that it is your primary residence.
Is new housing rebate taxable?
GST and HST housing rebates are not viewed as taxable income. But, of course, the rules can change at any time, so you need to double-check that is still the case when you are due to file your return. You also need to be aware that when you apply for the rebate, it can prompt the CRA to ask you to prove that you paid the GST or HST in the first place.
How is HST rebate calculated for new homes?
Calculating the HST rebate requires you to look at 2 different taxes. The provisional tax (PST), which varies, and the federal tax (GST). When you claim the HST rebate a percentage of both of these taxes is returned to you. Currently, it is 75% of the PST and about 36% of GST. The value of the home can also impact how much of a rebate can be paid.
"These articles provide information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in the articles. If you have specific legal questions you should consult a lawyer."