Tag Archives: Goods and Services Tax
HST to ding home buyers July 1
Rob Ferguson – Yourhome.ca
When it comes to the 13% harmonized sales tax kicking in July 1, lots of home buyers and sellers appear to be in for a big surprise, says the Canadian Real Estate Association.
“I run into people who still don’t know its coming,” says association president Pauline Aunger. “There are people who don’t listen to the news or read the newspaper.”
The controversial tax doesn’t apply to resale homes, but it does hit new ones — with a 75% rebate on the first $400,000 of the price tag — as well as real estate commissions, legal fees, home appraisals and moving costs.
Aunger urges people buying or selling homes and condos to close their deals before Canada Day if possible, noting the average buyer of a re-sale home could save about $1,500 by beating the controversial new tax.
The HST is a marriage of the broadly based 5% federal Goods and Services Tax — already charged on the above items and most goods and services — and the 8% provincial sales tax in Ontario, which does not now apply to real estate commissions, new homes and the like.
That means an extra 8% in taxes, although the government notes it cut income taxes Jan. 1 to help offset the HST hit.
For example: the real estate association calculates the additional tax at $80 on typical legal costs, $1,209 on sales commissions, $32 on home inspections, $80 on moving and $24 on home appraisals.
“If you’re buying, go out and buy now,” advises Aunger.
The jury is still out on whether the fast pace of home sales and rising prices is due to the looming HST, because experts say low interest rates are also playing a role.
It’s generally too late to avoid the HST on purchases of new homes because the government has ruled that deals to buy houses after June 18 are subject to the tax, says president Stephen Dupuis of the Building Industry and Land Development Association.
“Since last June, most of what you buy is for closing after this July 1, because most new homes are pre-sold and then it takes time to build them,” he explains. “Whether people know they’re still paying the HST or not, they’re still buying like crazy. We honestly don’t expect a blip after July 1.”
On a new home costing $500,000, the extra provincial portion of the HST totals $40,000. The 75% tax break for the first $400,000 is gradually phased out as the price rises above $500,000.
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Contact the Jeffrey Team for more information - 416−388−1960
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New-home HST hit
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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Contact the Jeffrey Team for more information - 416−388−1960
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HST Transition Rules
The provincial government has provided rules/guidance on how it will transition to the implementation of the proposed Harmonized Sales Tax.
Background
The provincial government has announced that it intends to combine the eight percent Provincial Sales Tax with the five percent federal Goods and Services Tax, creating a 13%t Harmonized Sales Tax (HST).
* The HST is NOT YET IN EFFECT. The provincial government has indicated that it intends to bring the HST into effect beginning on July 1, 2010; however, note transition rules below.
* HST will not apply on the purchase price of re-sale homes.
* HST would apply to services such as moving cost, legal fees, home inspection fees, and realtor commissions.
* HST will apply to the purchase price of newly constructed homes. However, the Province is proposing a rebate so that new homes across all price ranges would receive a 75% rebate of the provincial portion of the single sales tax on the first $400,000. For new homes under $400,000, this would mean, on average, no additional tax amount compared to the current system.
Transitional Rules for New Housing
* Generally, sales of new homes under written agreements of purchase and sale entered into on or before June 18, 2009 would not be subject to the provincial portion of the single sales tax, even if both ownership and possession are transferred on or after July 1, 2010.
* The tax would also not apply to sales of new homes under written agreements of purchase and sale entered into after June 18, 2009 where ownership or possession is transferred before July 1, 2010.
Additional Transitional Rules
* Where services straddle the HST implementation date of July 1, 2010, the tax charged for the service may have to be split between the pre-July 2010 and post-June 2010 periods. However, the HST will generally not apply to a service if all or substantially all (90% or more) of the service is performed before July 2010.
* Four key timelines are important (see below). All are based on the earlier of the time the consideration is either due (In general, an amount is due on the date of the invoice or the day required to be paid pursuant to a written agreement), or is paid without having become due. If consideration is due or paid:
* Before October 15, 2009, HST will generally not apply (however, see above transition rules for new housing).
* From October 15, 2009 to April 30, 2010, certain business that are not entitled to recover all of their GST/HST paid as input tax credit may be required to self-assess the provincial component of the HST with respect to goods or services supplied after June 30, 2010.
* From May 1, 2010 to June 30, 2010, HST will generally apply for services supplied after June 30, 2010.
* After June 30, 2010, HST will generally apply. An exception to this rule would be where ownership of the property is transferred before July 2010 or the invoice relates to services provided before July 2010.
* With regard to the lease or license of goods, including non-residential real property, HST will generally apply to lease intervals or payment periods on or after July 1, 2010 and the general rules noted above will apply. However, where a lease interval begins before July 2010 and ends before July 31, 2010, it is not subject to HST.
* With regard to the sale of non-residential property, HST is due where both possession and ownership of non-residential property occurs on or after July 1, 2010.
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Contact the Jeffrey Team for more information - 416−388−1960
————————————————————————————————————
Related posts:
- Changes Proposed for HST on New Housing The provincial government has announced some proposed changes to the…
- New-home HST hit From July 1, new-home sales in Ontario will be subject…
- HST will not affect resale homes Fortunately, home buyers choosing to purchase a resale home…
- Liberals agree to give homebuyers a tax break In a surprise move that will cost the provincial treasury…
- Harmonized Sales Tax Would Hurt Home Buyers Realtors have been calling for governments at all levels to…
