NOTE: This warning is aimed at Purchasers buying property in Ontario directly from a Builder ONLY.
NOTE: HST does not apply to a purchase of RESALE RESIDENTIAL PROPERTY.
In Ontario, the Harmonized Sales Tax (HST) consists of 8% PST (Ontario Provincial Sales Tax) PLUS 5% GST (Goods and Services Tax) being a total of 13%.
Keep in mind that the Builder’s price in your Purchase Agreement is based on an important assumption: the assumption is that you will use the property as your primary residence (for you and your immediate family, not cousins, nieces, nephews, aunts or uncles) therefore, as a buyer, you qualify to receive the HST New Housing Rebate.
Because of this assumption, the Builder will require you to assign back to the Builder your entitlement to receive the HST New Housing Rebate from the government. That way, the Builder obtains the value of the HST rebates from the government and does not need to charge YOU ON TOP OF your sale price. The assignment of this HST rebate typically occurs at Final Closing, and by assigning it, your purchase price from the builder will remain as stated in your Purchase Agreement.
IN CONTRAST, if you are an investor who does not intend to live in the property or have an immediate family member live there, then you DO NOT qualify for the HST reduced price arrangement with the Builder, but rather you are required to PAY THE HST REBATES IN FULL and then you must apply to have the amount of HST rebate RETURNED to you directly from the relevant government authority if you satisfy certain requirements (one year lease and to own for one year after closing). This means it is important that you do not lead the builder’s sales agent to believe that you are an investor if you are not!
The calculation of the total amount of available HST governmental rebates varies depending on the price of the property being purchased from the Builder, as noted in the following examples:
|HST Rebate||$25, 800|
|Builder Price||+ $484,5000|
It is wise to maintain records for you or your immediate family proving that the newly built property is your primary residence in order to qualify for the HST Rebate, including documents such as:
- A driver’s licence that reflects the property’s address as your primary address
- An invoice for a truck rental or mover to prove that you moved belongings into the property
- A copy of a post office address change notice
- A copy of a bank statement showing the property’s address
- Utilities bills as well as Visa or Mastercard showing the property’s address
Essentially, any piece of documentation that you can keep as proof that the newly built property is your primary address will work in your favour for the HST Rebate, if questioned later by a CRA auditor.
For further information regarding the HST Rebate when purchasing from a builder, including important considerations if the two purchasers are not related and the property is an investment, please call our offices at 416-222-1882 to speak with one of our lawyers.