Clarifying HST confusion

As the old saying goes, “time flies”, and it sure does feel that way about Ontario’s new Harmonized Sales Tax (HST), which has already been in effect for almost 7 months.  Even though consumers have been dealing with the HST since July 1st, it appears there is still confusion about its applicability to housing. 

Allow me to clarify. When it comes to housing, there is good news and bad news about the HST. The good news is that if you are buying a re-sale home, you will not (I repeat, NOT) pay HST on the purchase price of the home. On the other hand, if you are buying a newly constructed home, HST will apply.

The purchase price of re-sale housing was never subject to the old Provincial Sales Tax, or the federal Goods and Service Tax. When the provincial government began considering implementing a Harmonized Sales Tax, REALTORS fought hard to ensure that the old exemptions for re-sale housing were maintained, which is exactly what happened. As a result, if you are buying a re-sale home, you don’t have to worry about paying HST on the price of the home. That’s money that you can keep in your pocket, or use to keep mortgage costs down. 

Unfortunately, the same is not true for home buyers of newly constructed homes, which are subject to additional tax under the HST. Newly constructed housing has always been subject to the GST, meaning thousands of dollars of tax for home buyers choosing this option. Now, with the HST, new housing is also subject to PST, meaning thousands of dollars in added costs for home buyers of new housing. 

There is a silver lining for new housing: the provincial government provides a rebate of 75 per cent of the PST on the first $400,000 of a newly constructed home, or a maximum of $24,000.  For example, someone purchasing a new home priced at $500,000 would face $40,000 in additional tax from the provincial portion of the HST, which would be reduced to $16,000 with the rebate. Obviously, the rebate softens the blow, but an extra $16,000 of tax (in this example) for a newly constructed home is nothing to laugh at.

Taxes are not a topic that most people like to spend a lot of time thinking about, so I’m not surprised that there is still a lot of confusion out there about how the HST applies to housing.  With that in mind, I hope this has helped to make the HST a little easier to understand, and, for home-buyers of re-sale housing at least, a little easier to swallow.

Source: Bill Johnston - President of the Toronto Real Estate Board

Excerpt From: The Home News

Published: November 2010

Updated: January 2011

HST - Move is on to repeal an unfair tax

For years, GTA REALTORS® have been telling the City that the fair way for it to address its financial challenges is to get its finances in order, instead of burdening homeowners and homebuyers with additional taxes, like the Land Transfer Tax.

REALTORS® fought strongly against the idea of a Toronto Land Transfer Tax when it was first proposed in 2007. We heard the public's concerns and we stood up for home buyers, who we believe were being unfairly targeted by this tax. TREB's efforts were strongly supported by the public who also spoke out strongly against the Land Transfer Tax. The public spoke loudly then, but they spoke even louder last October when they gave Mayor Ford an overwhelming and clear mandate to repeal this unfair tax.

The City's proposed 2011 Budget is an important step to delivering on the Mayor's Land Transfer Tax mandate. In particular, it begins the process of addressing the City's financial challenges with fair options, including cost-containment measures. Furthermore, it sets the stage for a forthcoming detailed program and service review, which Mayor Ford has announced will begin in March. This is an important process, and one that REALTORS® have been calling for.

For years, Toronto's taxpayers have been bearing the burden of unsustainable City budgets. We believe that the proposed 2011 Budget stops the bleeding, and that by moving forward with Mayor Ford's commitments, including repealing the Land Transfer Tax, next year's budget will allow the City to flourish.

Source: Bill Johnston - President of the Toronto Real Estate Board, a professional association that represents 30,000 REALTORS® in the Greater Toronto Area.

Excerpt From: Toronto Sun

Published: January 21, 2011