Common Questions about the HST New Housing Rebate and HST New Residential Rental Rebate

Edited by Admin
Many investors have heard about how the HST Rebate affects their real estate investment and are aware of how the process works generally.  When a new construction property is purchased as a primary residence, the HST New Housing Rebate is credited immediately on closing with the credit being applied on the Statement of Adjustments.  In this scenario, the buyer has assigned over the right to the builder to claim the Rebate on their behalf and the builder pays CRA on closing for the buyer.  Most Purchase Agreements are written assuming that this is the scenario, with verbage in the HST section of the Agreement outlining these terms.  At closing, it's a wash - there is no additional HST due on closing for those who use their new construction properties as a primary residence.  What happens to investors who buy new construction real estate?  Investors are responsible for coming up with the portion of HST due on closing.  Why?  Because the process to apply for the rebate requires the investor to have a 1 year lease with a renter.  In this case, the builder washes their hands of the situation and makes the investor pay the remaining HST due on closing themselves and requires them to file directly with CRA.  Investors will see no HST New Housing Rebate on their Statement of Adjustments, but instead a credit to the vendor for $19,000 - $28,000 in HST, meaning that this will be due along with their other closing costs on the day of final closing and registration.  
Here are are three examples of common questions we get regarding the HST Rebate:
1. Who qualifies as an immediate family member with CRA for purposes of receiving the HST New Housing Rebate?
Immediate family members are considered children and parents.  Not cousins or other extended relatives.  Be very careful about claiming a family member lives there if they do not.  You will risk being audited and denied the HST New Housing Rebate later (meaning having it clawed back). 
2. Why do I have to pay HST on my condo that I bought on assignment even though it will be a primary residence?
Even if you, as the purchaserof a new construction property, areusing the property as a primar residence, you will be required to file for the HST New Housing Rebate manually.  In other words, you will not receive the Rebate automatically on your Statement of Adjustments on closing.  The reason is that CRA uses this Rebate program to track investors who "flip" or "scalp" new construction real estate.  As required with this filing to get your New Housing Rebate back, CRA will require the details of the assignment purchase and the original purchase from the builder.  
3. I filed my HST Rebate with my 1 year lease but I have not yet received my HST Rebate after a couple months.  Why?
Rental Rebate filings for new construction condos that were purchased within the $350,000 - $450,000 price range can be pulled for evaluation by a senior auditor at CRA for something called Fair Market Value Assessment.  If CRA has evidence that the condo in that purchase price range has significantly increased in value, they can re-assess the filing calculation to reduce the Federal portion of the rebate.  This can result in the HST Rebate being reduced by $1,000 - $6,000.   
HST Relief: Rebates & Loans specilaizes in filing for HST Rebates for our clients.  We also lend the HST due on closing for investors.  Give us a call with your specific questions at 1.866.832.1990.  Ask about our Rebate filing and HST Loan services.  

First Canadian Place • 100 King Street West • Suite 5700 • Toronto, ON • M5X 1C7

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