Debunking the HST Myth

Debunking the HST Myth

By: Steve Pacheco, Sales Representative- Century21 Miller

Before entering into a large transaction such as a newly constructed home, the wise consumer will look into total expenses, including HST. However, with a lot of myth, mystery and confusion out there, how do you determine what the HST expense will be?

A widespread myth is that HST is only applicable to new home purchases of $400,000.00 or more. However, contrary to this popular belief, HST is applicable to all new home purchases, regardless of purchase price.

Real Estate transactions may be eligible for both GST and Ontario “new housing” rebates, which will help counteract the impact of the HST on the consumer. Rebates are available for purchases of a new home or a substantially renovated home, provided it is to be used as your primary residence. To be eligible for these rebates, certain criteria must apply. For more information, please refer to the following links:

o GST rebate and Ontario new housing rebate:  http://www.cra-arc.gc.ca/E/pub/gp/rc4028/README.html

“For example, an individual purchased a new house, including the land, for $300,000 to use as the primary place of residence of the individual or a relation of the individual. The individual paid HST of $39,000 ($300,000 x 13%) and met all of the other conditions for claiming an Ontario new housing rebate and a GST new housing rebate.

The total amount of the new housing rebate to which the individual will be entitled will be calculated by adding the amount of the GST new housing rebate of $5,400 ($300,000 x 5% x 36%) for the federal part of the HST and the amount of the Ontario new housing rebate of $18,000 ($300,000 x 8% x 75%) for the provincial part of the HST. Therefore, the individual will be entitled to claim a total new housing rebate of $23,400 ($5,400 + $18,000).” (reference: CRA website November 8, 2010)

Despite this, due to a cap of $24,000.00 for the Ontario new housing rebate and the fact that the GST rebate is not eligible for new home purchases over $450,000.00, as the purchase price increases, the HST impact to the consumer also becomes more pronounced. Therefore, a new home purchase of $449,000.00 would have a differential of just under $4,000.00 over the pre-HST taxation. In addition, new homes purchased for investment purposes and are not considered the primary residence of the buyer are not eligible for these rebates and as such are subject to higher impact of the HST.

Conversely, savvy consumers are also aware that real estate transactions involving resale properties are only subject to HST on the commissions paid to the Real Estate Brokerage. This means that buyers of a resale property, do not pay any HST, as the seller of the property pays the HST on the commission. With my knowledge of the marketplace, I can assist you in locating a property that fits your “must have” criteria, while saving you the HST dollars you would be subject to under a new construction purchase. Contact me today for a free, no obligation consultation!

Additional resources:

Canada Revenue Agency (CRA) website:

http://www.cra-arc.gc.ca/tx/bsnss/tpcs/gst-tps/cnstrctn/nwhsng/ntr/bldng-eng.html

www.steve-pacheco.com

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Steve Pacheco

Steve Pacheco

Sales Representative
CENTURY 21 Miller Real Estate Ltd., Brokerage*
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