All new homes in Ontario are subject to HST. However, a HST Rebate has been around since mid 2010 since the CRA introduced the HST system in Ontario. The rebate is to discount homebuyers making this purchase their primary residence or investors that are going to be adding to the under-supplied rental market.
HST consists of two separate taxes; GST to the Federal government & PST to the Provincial. The GST credit has been around for a long time and hasn’t changed. You are credited 36% of the actual GST (5%) portion paid on a new purchase. However there is a restriction on any purchase over $350,000. The GST credit will start dwindling until it reaches $450,000, where it becomes 0. The Provincial portion (8%) of the tax is a credit of 75% of the actual amount paid capped at $400,000. What this means is that if you buy a property over $400,000 you will still be eligible for 75% of the 8% provincial tax paid but no federal rebate.
Here’s an example:
Purchase price: $350,000 + HST (GST 17,500 PST 28,000) = $395,500
GST Rebate: 36% = $6,300
PST Rebate: 75% = $21,000
Total Rebate: $27,300
This rebate is already built into the price lists you see from developers. On the price list, you would see a sale price of $368,200 (350,000 + HST – Rebates).
Ensure you file the proper HST rebate forms, or the CRA may come after you looking for their rebate money! Please consult your lawyer for more information on this.
While it’s tempting to flip your property in the hot Toronto real estate market, take caution of the rebate claw back. Investment property owners should be aware that in order for you to keep the HST rebate you must have rented out the property for at least a year, from your closing date, not occupancy date. Recently the government has been asking many investors who purchased properties and flipped them upon closing to pay the HST rebate back, which would equate to $27,300 from the example above, not exactly chump change!
For more information and for downloadable rebate forms, visit: http://www.cra-arc.gc.ca/tx/bsnss/tpcs/gst-tps/hsng/rbts/nwhsng/menu-eng.html