Buying a brand new pre-construction condo in downtown Toronto is exciting, but it may also bring up many questions and uncertainties. It can be confusing trying to understand how HST works, for example, and who pays for it. So, let’s break down HST when purchasing a pre-construction condo in Toronto and take a closer look at the HST Rebate.
In 2010, Ontario implemented Harmonized Sales Tax (HST), which raised the tax on new homes to 13% (HST) – a total of 5% GST (federal taxes) and 8% PST (provincial taxes). To help new homeowners cover the growing costs of owning a new home, the government created the HST Rebate Program. This program works in two ways – depending on what kind of buyer you are – to reimburse buyers for a portion of the tax.
The two ways that buyers can qualify for the HST Rebate in Ontario are:
- HST New Home Rebate (NHR): When you buy a pre-construction condo that you plan to live in (end user)
- New Residential Rental Property Rebate (NRRPR): When you buy a pre-construction condo as an investor with the intent of renting it out after closing (investor)
When you buy a pre-construction condo in Toronto, you’re assigning the right to the HST rebate to the builder. The builder then uses the rebate to reduce the purchase cost of the property. This portion of the HST is not added to your property’s purchase price, and the builder will apply for the HST rebate for the property, thus reducing the amount due at closing by the amount of the rebate.
In short: you don’t have to pay for HST on your new condo, as it’s already built into the final purchase price of the home, including the cost of the HST NHR. This is provided you’re a Canadian resident and provided that you, or an immediate family member such as a parent or sibling, plan on being the principal resident of the condo.
One thing to keep in mind is that if you sell or lease the property before the one-year mark, the Canada Revenue Agency (CRA) will require you to pay back the HST Rebate in full.
If you plan on purchasing a pre-construction condo with the intent of renting it out after closing, you need to apply for the New Residential Rental Property Rebate (NRRPR) rather than the NHR.
To receive the HST Rebate, you need to submit a one-year lease agreement and prove that the property will be rented out for one year after closing. Additionally, you must pay the full HST amount upfront and you will receive the rebate a couple of months after sending in the proof of the lease agreement. Similarly to the NHR, if you end up selling or flipping the property before the one-year mark, the CRA will require that you pay back the HST Rebate in full.
How Much Is the HST Rebate?
The amount of the HST Rebate varies depending on the price of the new condo. If the pre-construction condo is priced under $350,000, then you’re eligible to receive a maximum of $30,000 back (36% rebate on the GST portion, and 75% on PST). Between $350,000 and $450,000, there is a sliding scale, and for properties costing more than $450,000, a maximum rebate of $24,000 can be received.
There are many HST Rebate calculators on the internet that you can consult to calculate the exact amount, but keep in mind that if you’re purchasing a pre-construction condo and plan to live in it, the HST in the majority of cases will already be factored into the purchase price, and you don’t need to worry about it.