GST on Buying Real Estate

GST on Buying Real Estate

G.S.T. is payable on the purchase price of newly constructed or substantially renovated residential homes. When you remove or replace most of the house construction components except for the foundation, external walls, interior supporting walls, floor, roof and staircase, it falls under the purview of Substantially Renovated home and GST becomes applicable.

Used residential property purchase is not subject to GST, as the first user has already paid the GST to the seller.

GST is applicable at 5% and makes a substantial dent to a buyer’s budget at the time of closing. You need to prepare for this.

GST Rebate

Buyers are eligible for GST rebate if they are going to use the new home as their primary place of residence on a permanent basis. This must be evident at the outset of buying the home. In other words, a recreational cottage, investment property or a property bought as a retirement home in future do not qualify for GST rebate.

New homes priced above $450,000 do not qualify for GST rebate. GST is paid in full. New homes priced at $350,000 and below are eligible for GST rebate at maximum permissible rate of 36% of the applicable GST. Homes priced between $350,000 and $450,000 are eligible for GST rebate on a sliding scale.

So, lets get down to some school math:
Price of the new home                     $350,000.
Applicable GST $350,000X5%          $17,500. GST rebate 36% of $17,500            ($6,300)
(This is the highest rebate applicable)
Therefore, GST Payable                    $11,200.

GST for a new house below $350,000 is calculated as stated above.

Let us now see what the GST for a house will be if it is priced below $450,000 but above $350,000:

Say the Price of new home                             $399,900.
Applicable GST $399,900                                 $19,995. $6300 (highest applicable rebate)                 $100,000
X450,000-$399,900(purchase price)
$6,300X$50,100                                                $100,000 GST Rebate                                                        $3,156.30 GST Payable $19,995-$3,156.30                    $16,838.70

Some developers agree to credit the purchaser with the rebate on completion, but not all developers allow this. In such deals the purchaser must pay the full GST with the purchase price and claim GST rebate directly from CRA after closing.


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