On August 26, 2011, the provincial government announced that it will eliminate the Harmonized Sales Tax (HST) by March 31, 2013.  Since that announcement, I have heard of many people sitting on the sidelines with the anticipation that they will be saving 12% on the purchase of their new construction home. With the date rapidly approaching, I thought I would shed some light on just what this means for anyone looking to purchase a new house or condo.

First off, HST and GST are only applicable on new construction.  Any resale is exempt from HST or GST. Also, the elimination of the HST also means the elimination of the new housing rebate for homes up to $850,000.

So let’s look at the example of a $500,000 home:

- If the home completes on or before April 1, 2013 then HST will apply: 

• Purchase Price = $500,000
• HST (12%) = $60,000
• Re Home Rebate* = $25,000
• Net purchase price = $535,000

- If the home completes after April 1, 2013, then GST and the transitional tax will apply: 

• Purchase Price = $500,000
• GST (5%) = $25,000
• Transitional Tax (2%) = $10,000
• Net purchase price = $535,000

 

So as you can see, there is essentially no difference before or after April 1, 2013 except if construction is less than 10% complete before April 1, 2013.  If the construction starts after April 1, 2013 or is less than 10% complete before this date, then the transitional tax does not apply and the purchaser will save 2%.

It should also be noted that there will definitely be some savings for homes purchased over $850,000 as the new housing rebate has a threshold of $850,000.

* The New Home Rebate requires certain criteria that must be met in order to qualify. 

** The information above is not to relied upon and you should consult a tax accountant or lawyer for specific tax advice.