HST: What Does It Mean for Condo Investments?

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.

HST applied to new residential housing in Ontario

Hi HST Relief,
 
I need more information on how HST is applied to residential housing in Ontario.  What should I expect when closing a tonwhouse I bought in richmond hill?  Will there be HST and how much?  I signed the APS for $395,000.
 
 

Answers

By HST Relief (Admin)
Yes, there is HST applied to new construction real estate anywhere in Ontario - regardless if the condo, house or townhouse was purchased in Toronto, the GTA or anywhere else across Ontario.  Some of the HST is built-into the $395,000 price that you agreed to with the builder.  The portion of the HST that is not built-into the purchase price is termed the HST Rebate portion and how that is handled upon final closing depends on how the property will be used at the time of closing.  So, if it will be used as a primary residence for all purchasers, or the purchaser's immediate family members (as defined as children, parents or siblings by CRA) then the HST Rebate portion will be credited to the purchaser immediately on the Statement of Adjustments.  In essence, the purchaser will not own any additional HST.  If the purchase is using the investment property for anything other than a primary residence, the purchaser's real estate lawyer will be required to notify the builder and the HST Rebate portion will be due upon final closing.  For a purchase price of $395,000, this will be about $28,000.  Be prepared to pay that along with your other closing costs on the final closing date.
 
If/when you have a 1 year lease with a renter, we can file to get the HST back through the New Residential Rental Rebate program.
 
Call us if you have any questions r if you would like us to represent you for the HST Rebate filing.  1.866.832.1990.
 
 

HST rebate on construction

Are there HST rebates offered on all new construction?

Answers

By HST Relief (Admin)
Good question.
 
If you have paid HST on the closing of a new home, townhouse or new condo purchased from a builder, you may be eligible for a HST rebate p to $29,000.  You may also be eligible for an HST rebate of up to $24,000 if you have built a new home on vacant land.  Lastly, if you have substantially renovated your home, you may also be entitled to a rebate up to a max of $16,300.
 
Call us for more detailed inquiries at 1.866.832.1990 or email us at info@hstrelief.ca
 

Is there HST on all condos?

Hi,
 
I am shopping for a condo at College Park in Toronto.  Should I expect to pay HST on my condo purchase?

Answers

By HST Relief (Admin)
Since Harmonized Sales Tax was introduced in July 2010, all new construction homes and condominiums are now subject to HST.  However, if you are shopping for a condo that has previously been lived in, often termed a resale condo, then no.  There is no HST on resale real estate purchases, only for new purchases from a builder or developer.  If you have additional questions about how HST works for a property you are interested in, or want to inquire about your eligiblity for a HST rebate or HST loan, then please call us at 1.866.832.1990 or email info@hstrelief.ca
 

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