Enhanced New Housing Rebate | New Rental Housing Rebate | Transitional Rules
The 2009 Ontario Budget proposed a comprehensive package of tax changes. Central to this proposed tax package is a single, value-added sales tax, which, subject to legislative approval, would come into effect on July 1, 2010. The province is proposing an enhancement to the new housing rebate that was announced in the 2009 Ontario Budget. The new housing rebate would be enhanced so that new homes purchased as primary residences across all price ranges would qualify for a rebate of up to $24,000, while continuing to ensure that, on average, new homes priced up to $400,000 would not be subject to additional tax compared to the retail sales tax (RST) currently embedded in the price of new homes.
The effect of the enhanced rebate would be to apply the provincial portion of the single sales tax at a rate of two per cent on the first $400,000 of the purchase price of a new home and at a rate of eight per cent on the portion above $400,000. The rebate would be calculated as 75 per cent of the provincial portion of the single sales tax payable on the purchase of a new home, up to a maximum rebate of $24,000.
This provincial rebate for new housing would be provided for the same types of new residential properties for which a Goods and Services Tax (GST) new housing rebate is available. Qualifying housing would include substantially renovated housing, co-operative housing, owner-built housing, housing on leased land, mobile homes and modular homes for use as primary places of residence.
Ontario’s new housing rebate would be federally administered in a manner similar to the GST rebate for new housing. Individuals would be able to file an application for the rebate directly with the Canada Revenue Agency (CRA) if the builder does not pay or credit the rebate to the purchaser at the time of purchase.
New Rental Housing Rebate
To support affordable rental housing in Ontario, the province is proposing to provide a rebate for new rental housing, similar to the proposed rebate for new homes. The proposed rebate would be available for new rental housing, including investment properties to be rented out, for use as primary places of residence. This rebate would apply across all price ranges up to a maximum rebate of $24,000, while ensuring that, on average, new rental housing priced up to $400,000 would not be subject to additional tax compared to the RST currently embedded in the price of new rental housing. The effect of the rebate would be to apply the provincial portion of the single sales tax at a rate of two per cent on the first $400,000 of the purchase price of a new rental home and at a rate of eight per cent on the portion above $400,000.
Landlords who purchase new rental homes would be eligible for the rebate, calculated as 75 per cent of the provincial portion of the single sales tax payable on the purchase of a new rental home, up to a maximum rebate of $24,000. Landlords who build their own rental homes and who would be subject to the single sales tax under self-supply rules would also be eligible for the rebate. In the case of traditional (non-condominium) apartment buildings, the rebate calculation would be based on each rental unit rather than the entire apartment building.
This rebate for new rental housing would be provided for the same types of new residential rental properties for which a GST rebate is available. Qualifying housing would include substantially renovated rental housing, co-operative rental housing, additions to traditional apartment buildings, long-term residential care facilities, rental mobile homes and rental modular homes for use as primary places of residence. The rebate would also be available for leased land where the land is used for residential purposes.
Ontario’s rebate for new rental housing would be federally administered in a manner similar to the GST rebate for new residential rental properties. Landlords would be able to apply for the rebate by filing a rebate application with the CRA.
Grandparenting
Written agreements before announcement of transitional rules
Generally, sales of newly constructed or substantially renovated homes under written agreements of purchase and sale entered into on or before June 18, 2009 would be grandparented, such that these sales would not be subject to the provincial portion of the single sales tax where both ownership and possession of the homes are transferred after June 2010.
Builders would be able to recover the provincial portion of the single sales tax payable on most purchases through input tax credits, as under the federal GST, with limited exceptions. However, builders of grandparented homes would generally be required to pay an amount-a transitional tax adjustment-to account for tax that would (on average) have otherwise been embedded in the new homes under the current RST regime. Builders would also be required to meet certain reporting and disclosure requirements for grandparented homes.
