Anyone who purchases a new property from the builder in Ontario needs to pay HST on top of the property price. Having said that, both the federal and provincial governments issue rebates to the new house purchasers in order to promote the housing economy and to help release the tension in the residential long-term rental market. The interesting part is that the higher the property price is, the lower the rebate the new home buyer can get. When the property price is above $450,000, the rebate stays at the lowest line of $24,000.
We do HST rebate on a daily basis and there are 3 common scenarios that the rebate is eligible:
- The buyer closes the new home as for self-residence but for some reason s/he has not got the $24,000 discounted from the purchase price
- The buyer closes the new home as for rental investment so s/he does not get the $24,000 from the builder when closing
- The buyer closes the new home as for self-residence but s/he rents it out afterward
It seems in the third scenario the new home buyer doesn’t owe CRA anything if s/he can get the $24,000 from rental because s/he can use this $24,000 to offset the other $24,000 from self-residence, but in reality there are some tricks in the application, for example CRA may say:
“The taxpayer is not eligible to the $24,000 as self-residence, so since the day of closing when the taxpayer started enjoying the $24,000 till the day his or her rental $24,000 is approved, a daily compound interest rate of 6% is calculated so the taxpayer now owes CRA $x,xxx.xx”
All we do is to avoid things like this from happening, thus, please contact our Admin team for more information.