Helen Mor­ris, National Post

If you are in the mar­ket for a newly built home and if men­tal arith­metic was not your best sub­ject at school, now may be a good time to reach for a cal­cu­la­tor. From July 1, new-home sales in Ontario will be sub­ject to the new Har­mo­nized Sales Tax (HST). The exist­ing 8% Provin­cial Sales Tax (PST) and 5% fed­eral Goods and Ser­vices Tax (GST) will be com­bined to cre­ate the 13% HST.

Whether or not you will be on the hook to pay the HST on clos­ing day is all down to when you pur­chase your new home and how much it cost.

“Lots of con­dos were sold in 2007, 2008, 2009 that peo­ple will not get pos­ses­sion of until after July 1, 2010,” says Stephen Dupuis, pres­i­dent and CEO, Build­ing Indus­try & Land Devel­op­ment Asso­ci­a­tion (BILD). “But if you signed that agree­ment before June 18, 2009 (the day the Ontario provin­cial gov­ern­ment announced the HST), you’re off the hook.”

If you signed an agree­ment to buy a new home after June 18 last year, whether or not you pay HST on the sale depends on when you get in to your new home.

“If you signed an agree­ment after June 18, 2009, and the builder can get you in the house before this June 30, that is also an exempt deal. My advice to the buyer: Make damn sure the builder can trans­fer that prop­erty by June 30. Close the deal,” says Mr. Dupuis. “If you bought after June 18, 2009 and it is clos­ing after July 1, 2010 – that’s an HST deal.”

Even if you find your­self liable for the HST, a rebate may help to soften the blow.

Accord­ing to the Ontario gov­ern­ment, buy­ers of new homes will receive a rebate of up to $24,000 regard­less of the price of the new home. The aim of this rebate, Queen’s Park says, is to ensure that buy­ers of homes priced up to $400,000 will pay no more and some­times less tax than under the old PST system.

“There’s a rebate up to a thresh­old of $400,000 so the HST would nor­mally affect the high-end prop­er­ties more,” says Robert Hogue, senior econ­o­mist at RBC Economics.

Given the rebate pro­vi­sion, the intro­duc­tion of the HST may only affect cer­tain areas of Toronto’s hous­ing market.

“You might get a bit more of a surge in starts or trans­ac­tions at the higher end of the mar­ket prior to July 1,” says Mr. Hogue.

Other ana­lysts sug­gest some demand may shift away from homes just above $400,000 to prop­er­ties sell­ing just below that mark.

“[In] Toronto, about half the mar­ket is alleged to be about rev­enue neu­tral after the tax, but for that other half the taxes will be higher,” says Peter Nor­man, senior direc­tor, Eco­nomic Con­sult­ing, Altus Group. “One thing we do know in eco­nom­ics, [when] you put a tax on some­thing, it’s going to divert some demand away from that product.”

Back to that rebate calculation:

“For a $400,000 house, tax is 8% ($32,000), but the provin­cial rebate is 6% ($24,000) so that leaves you $8,000 in tax payable,” says Mr. Dupuis.

How­ever, because the builder will receive an input tax credit on all the HST payable – which Mr. Dupuis says is roughly 2% of the house price – the builder should be able to pass the sav­ing on to the homebuyer.

“Since [the builder] is get­ting the input tax cred­its on the con­struc­tion of the house, they should have low­ered that house price by $8,000. Now, nobody is ever going to know if the builder is putting the tax cred­its in his pocket,” says Mr. Dupuis. “Ulti­mately, my advice to the home­buyer is, for good­ness’ sake, don’t try and fol­low the money and don’t try and get obsessed on the embed­ded tax. Look at the bot­tom line ask­ing price. That way you can com­pare builder to builder and you can com­pare new to resale.”

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