When an individual purchases or constructs a new home, or substantially renovates an existing home, the individual pays GST on the purchase price or on the costs of renovation. The GST New Housing Rebate provides a refund to the individual for a portion of the GST paid.
The GST New Housing rebate is available to individuals in Canada who:
- Purchase a newly constructed house
- Construct a new house themselves
- Substantially renovate an existing house
- Purchase shares in a housing co-op
What is the amount of the rebate?
The amount of the rebate is 36% of the GST paid up to a maximum of $6,300 for a home valued at $350,000. For homes valued at more than $350,000, the rebate decreases until it is completely eliminated at a home value of $450,000.
Filing for the rebate
Filing for the rebate is slightly different depending on whether the house is owner-built or purchased from a builder
To file for the rebate related to a house and land purchased together from a builder, you must complete forms GST190 and GST190-WS.
To file for the rebate related to an owner-built house, you must complete forms GST191 and GST 191-WS.. Owner-built housing includes a house constructed on contract by a builder on land already owned by an individual. Substantial renovations are also considered owner-built housing.
Receiving the rebate
There are two ways to receive your rebate:
- For owner-built housing, the individual mustthe GST191 rebate form upon completion of the house or substantial renovation, and the individual eventually receives a cash rebate from the Canada Revenue Agency once the rebate form is processed. This can take some time as the CRA needs to receive and process the form and administer the payment of the rebate.
- For housing purchased from a builder, the individual may follow the same process as for owner-built housing or, more commonly, may assign the rebate to the builder to be applied against the purchase price. The benefit of this method it that you receive the value of the rebate up-front and do not need to wait to receive the rebate from CRA.
The builder and the purchaser must consider whether GST on the house is included in the agreed-upon price or whether GST applies on top of the agreed-upon price. This should be discussed up front so that both parties understand the full price. The buyer ultimately pays the GST, whether it is included in the purchase price or added to the purchase price.
Other GST New Housing Rebate considerations:
- The GST rebate becomes void if the new house sold within the first 12 months.
- The individual (or builder if assignment of the rebate) must apply for the correct rebate by filing the correct form.
- Either the individual purchaser or a close blood relative (parent, child, sibling, spouse) must live in the house in order to claim the rebate.
- Any co-signors on the house other than direct blood relatives are also required to live in the house.
- The time limit for applying for the rebate is two years from the completion (occupancy) of the house.
- If the rebate is assigned to the builder, there is some added complexity to filing the builder’s GST return and properly reporting the new housing rebate assignment.
In order to ensure that the GST new housing rebate is properly calculated, and that the forms are correctly completed and filed, consider seeking professional advice from a CPA.
Written by: Chris Brien, CPA, CA