If you have been reading the articles posted by our company, HST Relief, you likely have a good understanding of how the HST New Housing Rebate and the New Residential Rental Property Rebates work. If not, have a look at this brief article here to get up to speed.

The HST rules are slowing purchasing speed and stabilizing the condo market by making it more costsly and difficult for investors to buy new construction real estate. How? Simply because purchasing new construction now costs investors more, as CRA demands HST to be paid on new construction.  First, those who cannot prove to their developer that they are moving into the new unit themselves (whether true or not) are being charged the HST rebate upon closing. Having to come up with an additional $16,000 - $29,000 upon closing is a large consideration to those investors who look to the condo market as a place to earn a quick buck. The deterrents don’t stop there. If you are caught wrongfully claiming a condo as your primary residence to avoid the HST bill, CRA will have you remedy it by paying the HST plus penalties, plus interest.  CRA has an entire division dedicated to these audits called the GST/HST New Housing Rebate Division. What makes things particularly nasty on the part of CRA’s auditing team is that they often do not audit until the 2 year mark post-closing, when the investor no longer is eligible for the New Residential Rental Property Rebate to recover the HST that they paid on closing and to get their money back. The initiative comes from the fact that CRA estimates that 70% of primary residence claims through the builder are false. CRA also claws back the HST rebate you received when you sell your investment in less than 1 yr - 18 months after the final closing date and may accuse you of "flipping” for investment purposes and send you a bill for full business income tax instead of capital gains on your profit.  There are several articles online that describe how CRA is specifically creating programs to target those who are making big bucks in Ontario's real estate market.  Clients ask us all the time why the HST Rebate program exists (especially when you can file with a 1 year lease to get your HST due on closing back in 45-60 days) - the answer is because CRA uses the information you provide during the HST Rebate filing to track your real estate investments.  They want to make sure you are paying your fair share of taxes when you go to sell the property.  Several news outlets are now reporting on exactly this process - read more about that here.

In spite of this, real estate is still undoubtedly the best investment for Ontarians. The market is growing steadily with over 100,000 people moving to the GTA annually, creating a steady demand for housing. Real estate is the only investment one can leverage 5 times with growth of the total aggregate with only a mere 20% down payment (in the case the the real estate investment is mortgaged at 80%).

So, what advice does HST Relief:Rebates & Loans give to investors? Continue investing and use our services to keep yourself in CRA’s good books. HST Relief offers loans for the HST amount due on closing as a sort of bridge financing until we can reclaim your HST rebate. Do not lie and say a pre-construction condo or house is your primary residence when it’s not. Have HST Relief file your HST rebate for up to $29,000 and get your money back. There are several loopholes that CRA uses to deny rebates. Do not fall into this trap yourself. Have us look out for your funds. HST Relief was founded by real estate investors and a mortgage broker all with over 15 years experience in the industry – we’re in the business to allow our family and friends to continue investing! For more online reading, check out our clients’ FAQs with our team’s detailed answers posted here.