HARMONIZED SALES TAX (HST) AND PURCHASES OF NEWLY BUILT HOMES
The following is intended as a review of the Ontario HST, specifically the application of the Provincial portion of the HST to purchases of newly built residential property. For complex inquiries or questions please contact the author.
HST will apply to purchases of newly built residential homes closing on or after July 1, 2010 where the Agreement of Purchase and Sale for the property was signed after June 18, 2009. The sale of a home previously occupied by an individual as a place of residence (USED RESIDENTIAL PROPERTY) is exempt from GST and will also be exempt from HST. The HST is 13%. The Federal portion (GST) is 5%. Normally builders include the GST in the purchase price for newly built residential property and any rebates the purchaser is entitled to are assigned by the purchaser to the builder. The provincial portion of the HST is 8%. Some builders are including this 8% portion in the purchase price for newly built property and some are not. Prospective purchasers of newly built residential property should clarify during all builder consultations whether the HST and/or portions of it are or are not included in the purchase price. This article will address the costs to the purchaser where the 8% provincial portion of the HST is not included in the purchase price and is payable by the home purchaser.
Where a newly built residential home is purchased as a primary place of residence for a purchaser, a 75% rebate can be claimed by the purchaser on the 8% Provincial portion of the HST up to a maximum of $24,000.00.
Three examples will illustrate the application of the provincial portion of the HST where it is payable by a purchaser:
Home Purchase of $250,000.00
8% (Provincial portion HST) x $250,000 purchase price = $20,000
75% rebate on $20,000 = $15,000 (allowable rebate).
$20,000 – $15,000 = $5000 payable by purchaser as Provincial portion of HST, after rebates.
Home Purchase of $300,000.00
8% (Provincial portion HST) x $300,000 purchase price = $24,000
75% rebate on $24,000 = $18,000 (allowable rebate).
$24,000 – $18,000 = $6000 payable by purchaser as Provincial portion of HST, after rebates.
Home Purchase of $500,000.00
8% (Provincial portion HST) x $500,000 purchase price = $40,000
75% rebate on $40,000 (up to a maximum rebate of $24,000)
$40,000 – $24,000 = $16,000 payable by purchaser as Provincial portion of HST, after rebates.
One of the most important things for prospective purchasers to keep in mind when purchasing newly built residential property is to determine, as best as possible, all costs related to the purchase over and above the purchase price. It should be clear to prospective purchasers that where the provincial portion of the HST is NOT INCLUDED in the purchase price of a newly built residential property the purchaser should determine the cost and budget accordingly.
Thank-you for reading. Please contact the undersigned for further inquiries. We would ask that you consider our firm for any future real estate, wills and estates, and/or corporate law assistance you, your clients, or your family may require.
142 Simcoe Street North
Oshawa, ON L1G 4S7
ph: (905) 436-9015
fax (905) 436-6098
