Proposed Changes to Enhance the New Ontario Housing Rebate
The 2009 Ontario Budget proposed a single, value-added sales tax, which is intended to come into effect on July 1, 2010. One industry that will be significantly impacted by this new measure is the housing industry. On June 18, 2009, the Ministry of Revenue issued a bulletin to provide further details on the impact that the Harmonized Sales Tax (HST) will have on this industry.
New housing rebate
Current GST rules provide for a partial rebate of GST on the purchase of a new home. When the Ontario HST was originally announced, it was proposed that buyers would also be able to claim a partial rebate of the 8% provincial portion of the HST for new homes priced up to $500,000. The rebate for new primary residences under $400,000 would be 6% of the purchase price, with the rebate amount reduced for homes priced between $400,000 and $500,000.
The province has enhanced the new housing rebate as follows:
All purchasers of new residential property will now be eligible for the new housing rebate on the first $400,000 of the purchase price. The rebate will be equal to the lesser of $24,000 or 6% of the purchase price
New residential property purchased or built for rental purposes will now be
eligible for the rebate. The rebate, where new rental residential property is purchased, will be based on the per unit value of the rental complex. If the landlord builds their own rental property, then the value for rebate purposes will be the value established under the self-supply rules.
Complex transitional rules have been issued for transactions which straddle the July 1, 2010 implementation date. A separate release will deal with the transitional issues.
Builder disclosure requirements for transitional housing
If a written agreement of purchase and sale for a newly constructed or substantially renovated home or rental home is entered into after June 18, 2009 and before July 1, 2010, the builder is required to disclose in the agreement whether the provincial portion of the proposed single sales tax will apply and, if so, whether the stated price in the agreement includes the provincial portion of the proposed tax, net of the Ontario new housing rebate. If the transaction would be subject to the provincial portion of the single sales tax and the builder does not make this disclosure, the stated price in the written agreement will be deemed to include the provincial portion of the new single tax.
Home builders should amend their sales contracts to ensure that the impact of the provincial portion of the new single tax is fully disclosed.