The Provincial and Federal Governments will combine the 7% Provincial Sales Tax PST and the 5% Federal Goods and Services Tax GST into the 12% Harmonized Sales Tax on July 1, 2010. The HST applies to new homes. It does not apply to resale homes.

 

HST rebate: Buyers of new homes will be eligible for a rebate of 71.43% (5%) of the 7% provincial portion of the HST to a maximum rebate of $26,250. Homes prices at more than $525,000 will be eligible for a flat rebate of $26,250.

 

GST rebate: the old GST rebate rules still apply and are available to a maximum purchase price of $450,000. The rebate is 36% of the first $350,000 and is gradually phased out from there up to $450,000

 

Property Transfer Tax (PTT) is a separate provincial tax on all property transfers. The rate is 1% on the first $200,000 and 2% on the remainder of the purchase price and charged on the price of the property before the GST/HST is applied. Eligible first-time home buyers may qualify for a PTT exemption.

 

The only difference in the HST system from our previous tax system is when you buy new construction over the price of $525,000.

 

For example: If you buy a new home for $600,000 …you will pay $5,750 more in taxes. PTT (1% & 2%) remains the same $10,000. GST (5%) remains the same $30,000. Provincial portion of the HST (7%) is $32,000. less the maximum rebate of $26,250 equals the additional tax you will pay under the new system …$5,750

Many people are very concerned with the implications the HST could have on new home construction. Changes quite often seem to have a way of evolving into something which becomes a “new normal” although in the short term, I am certain we will see somewhat of a slow down. One market that may go up is resale homes, as demand increases in the event buyers shy away from new.