In September 2023, the Canadian Prime Minister made an important announcement regarding the GST rebate for new construction. Now, if you’re building properties with four units or more, you can get a full refund of the GST paid, which used to be a partial rebate. This modification will significantly lower expenses for builders. In this article, we will explain the details and benefits of the new HST rebate policy, and how it can help you save money and increase your profitability in the real estate market.
The new GST rebate rule is part of the federal government’s plan to stimulate the supply of new purpose-built rental housing, such as apartment buildings, student housing, and seniors’ residences, by removing the 5% GST cost that builders incur on these projects.
The new GST rebate rule will apply to projects that begin construction between September 14, 2023 and December 31, 2030, and complete construction by December 31, 2035.
The new GST rebate rule will increase the existing GST Rental Rebate from 36% to 100%, and remove the existing phase-out thresholds for purpose-built rental housing projects. This means a full recovery of the GST (or the 5% portion of HST) on qualifying rental units.
To qualify for the new GST rebate rule, the new residential units must be in buildings with at least four private apartment units (with a private kitchen, bathroom, and living areas) or at least 10 private rooms or suites (e.g., a 10-unit residence for students, seniors, or people with disabilities). At least 90% of residential units must also be designated for long-term rental.
The new GST rebate rule will not apply to individually-owned condominium units, single-unit housing, duplexes, triplexes, housing co-ops, and owned houses situated on leased land and sites in residential trailer parks. It will also not apply to renovations of existing residential complexes or to co-operative housing corporations where occupants have an ownership or equity interest.
On November1, 2023, The Doug Ford government announced a parallel policy for federal new GST rebate rules. The enhanced rebate removing the full provincial portion of the Harmonized Sales Tax (HST) on qualifying new purpose-built rental housing, in line with the federal government’s enhanced GST New Residential Rental Property Rebate.
The enhanced rebate will apply to qualifying projects that begin construction between September 14, 2023 and December 31, 2030, and complete construction by December 31, 2035.
To qualify for the enhanced HST New Residential Rental Property Rebate, new residential units must be in buildings with at least four private apartment units or at least 10 private rooms or suites and have at least 90 per cent of residential units designated for long-term rental.
The enhanced Ontario HST New Residential Rental Property Rebate would be equal to 100 per cent of the provincial portion of the HST, with no maximum rebate amount. This means that the GST/HST (13 per cent) would be entirely eliminated on qualifying projects.
For example, for a residential rental unit valued at $500,000, the enhanced Ontario HST New Residential Rental Property Rebate would deliver $40,000 in HST relief. When combined with the enhanced GST New Residential Rental Property Rebate, the total rebate amount would be $65,000.
The new HST rebate is great news for rental property builders in Ontario. Even though we’re waiting for more specific rules, the advantages seem promising. We’re ready to assist you in understanding these changes and making the most of the new opportunities in the real estate market.