Search Results for: hst on new homes ontario calculator
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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