How The Courts Are Interpreting The New Housing HST Rebate Rules

The Canada Revenue Agency (CRA) continues to disallow claims for new housing rebates on strictly technical grounds. Ngai (Ngai v. R, 2019 FCA 181 (Federal Court of Appeal)) demonstrates that developers, purchasers, and their advisors should carefully review these rules where unconventional circumstances are involved (e.g. friends or extended family acting as co-purchasers).

The Federal Court of Appeal in Ngai held that a non-related purchaser of a residential complex cannot act as an agent when claiming the new housing rebate on behalf of a principal. This is an important decision that significantly narrows the availability of the GST/HST New Housing Rebate for many purchasers of new residential homes.

Ngai involved an aunt and nephew acting as co-purchasers of a new house, solely to assist the nephew with financing. The aunt applied for a GST/HST New Housing Rebate, which was denied because the aunt and her nephew were not related persons. The new housing rebate is only available if a purchaser or a related person intends to occupy a home as their principal residence, and uncle/aunt-niece/nephew are not related persons under the Excise Tax Act and Income Tax Act. Subsequently the aunt successfully appealed the CRA’s decision in Tax Court on the basis that the aunt applied for the rebate as an agent of her nephew.

The Federal Court of Appeal overturned the Tax Court’s decision. The Court found that only an individual who is a “particular individual” for the purposes of the new housing rebate is eligible to apply for the new housing rebate. In other words, an agent cannot claim the rebate on their principal’s behalf. Here, the aunt had to qualify as a “particular individual.” Her status as her nephew’s agent was irrelevant.

How Is The HST Rebate Calculated In Ontario?

Eligible new home buyers can claim a rebate for 36% of the federal portion (5%) of the HST paid on a new home with a pre-tax price less than or equal to $350,000. Where the pre-tax price is more than $350,000, but less than $450,000, the rebate for the federal portion of the HST is gradually clawed back and no rebate is available where the purchase price is more than $450,000. The maximum rebate for the federal portion of the HST is $6,300. 

In addition, an eligible new home buyer can also claim a rebate of 75% of the Ontario portion (8%) of the HST. Although this rebate is available for all homes, regardless of their purchase price, the Ontario portion of the rebate is capped at a maximum of $24,000. 

Who Is Eligible To Receive The New Housing HST Rebate?

You are eligible to receive the New Housing Rebate if you have:

  • Purchased a new house, substantially renovated a home or constructed a home.
  • The house is to be used as your or your blood relative’s primary residence.
  • Purchased shares in a co-op (co-operative) housing complex for the purpose of using the unit in the complex as your or your blood relative’s primary place of residence.
  • Substantially renovated your home or constructed a new one, or hired someone to substantially renovate or construct your or your blood relative’s primary residence.

The rebate also applies to mobile homes and floating homes.

How Long Does It Take To Get The New Housing Rebate?

The New Housing Rebate application must be filed with the Canada Revenue Agency (CRA) within two years of the completion of renovations or the date of occupancy for new home builds. Homeowners can expect to receive their New Housing Rebate from the CRA within 60 days. We have seen rebates processed in two weeks but some rebates can take up to six months to process should the CRA decide to audit the rebate.

Do Rental Properties Qualify For Rebates?

The New Housing Rebate is intended for buyers who intend to live in the newly renovated or built home – principal residents. If an investor builds a home with the intent of renting the property it out, they qualify for a different rebate, the New Residential Rental Property Rebate.

Investors who have purchased, constructed, substantially renovated, or made an addition to a Co-op or Multiple Unit Residential Complexes are eligible to qualify for the New Residential Rental Property Rebate. This rebate is highly specialized and our experts would be happy to discuss how best to proceed. Filing the wrong rebate could mean losing out on the rebate!

How Do I Claim the Rebate On A New House?

Homebuyers that purchase a new house from a builder are eligible for a New Housing Rebate if they are purchasing the home as the principle resident. At the time the homebuyer completes the purchase transaction, he or she will agree to an assignment arrangement which sees the purchaser “assigning” the rebate for the home to the home builder. Builders usually factor the rebate amount into the price of the house. For example, a $500,000 new-home in Ontario already has a $24,000 rebate built into the purchase price.

In some instances the builders or their counsel may insist that the purchaser pays the GST/HST rebate at closing. In our previous example, the buyer would be required to pay an additional $24,000 at closing and then submit a rebate application to the CRA receive their rebate. This rebate is called the New Housing Rebate Application for Houses Purchased from a Builder. This rebate is highly specialized and our experts would be happy to discuss how best to proceed.

How Can We Help You

With the help of experts, the process of obtaining the New Housing GST/HST Rebate is simple:

  1. Contact us at 1-647-281-5399 to verify that you qualify for the rebate.
  2. Book a time to meet with one of our experts.
  3. Gather the following documents:
    • All construction or renovation invoices
    • Building permit(s)
    • Lot and plan numbers
    • in the case of substantial renovation, a detailed description of the work completed

In addition to having a strong relationship with the Canada Revenue Agency (CRA), we have built and renovated a number of homes over the past 15 years. As such we have an intimate knowledge of what the CRA is looking for when filing a rebate. We will advise you of which documents and invoices are required in order for us to prepare the application on your behalf. Our experts will review the associated costs and documents to ensure that your application does not get delayed or rejected before we submit the claim.

We will ensure that you receive your maximum New Housing GST/HST Rebate. With Sproule + Associates you have nothing to worry about – we will take care of all the paperwork and the entire application process. Should any issues arise with the Canada Revenue Agency (CRA) and your application we will work with the CRA to resolve those issues. Contact us directly or call +1-647-281-5399 to book a free consultation.

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