When purchasing a new home, you need to be aware of the Goods and Services Tax (GST). This blog includes some quick facts about GST and available rebates to get you familiarized with the tax.
1. GST is 5%.
GST is quite straightforward. It is 5% of the purchase price.
2. The tax applies only to new and substantially renovated properties.
It applies to new and substantially renovated properties.
New homes have the 5% GST payable from the purchase price.
Substantially renovated properties are more than just new flooring or new appliances in a home. To be considered a true substantially renovated property, it needs to be much more than that.
3. There are two different rebates: GST New Housing Rebate and GST New Residential Rental Property Rebate.
The two different rebates are the GST New Housing Rebate and GST/HST New Residential Rental Property Rebate.
The numbers are exactly the same in terms of purchase price range and tax paid. However, the purpose of the rebate is different.
Read more about the GST New Housing Rebate in our previous blog. It details more about what GST is and how the new housing rebate works.
4. Rebates work out to be up to 36% of the GST paid.
Both rebates work out to about 36% or exactly 36% of the GST that’s paid.
The rebates apply in full (36%) to properties with purchase prices under $350,000.
They do not apply to properties with purchase prices over $450000.
Partial rebates apply to homes with purchase price between $350,000 and $450,000. There is a sliding scale which means you receive a partial rebate up to 36% depending on the home price.
5. The difference in the two rebates is in the timing.
If you are the investor, you have to pay the full GST on closing. Then you wait and apply for the rebate after the closing. So you need all the cash up front.
If you are a new home buyer and are going to move in, you usually get the rebate right on closing from the developer. You need to check the contract to make sure, but most developers allow you to claim the rebate on closing. So you don’t need all the 5% GST paid on the closing date.
If you are new to these terms, this was a quick intro to GST and GST rebates on homes.
To learn more next, check out our blog on GST on Assignments and Resales that goes more in-depth about the tax.