Muddy York: Toronto Real Estate Blog

By Martin K. I. Rumack

Some people have asked the question what is the HST (Harmonized Sales Tax)? The simple answer is that it is basically the Goods and Services Tax at a higher rate. Ontario as a result of the introduction of the HST has effectively replaced the Provincial Retail Sales Tax. If the transaction is not subject to GST then it is not subject to HST.

Concerning real estate, the HST will apply to new residential homes and condominiums as well as to all commercial, retail and industrial real estate properties, both existing and new properties. HST will not apply to “used residential properties.” However, the HST will apply to moving costs, appraisals conducted for mortgage financing, lawyers’ fees and disbursements, real estate commissions, contractors’ costs, etc. with respect to both “new” and “used” properties. While HST will not be charged directly to the actual condominium, co-operative, and co-ownership maintenance fees, the goods and services provided to the Condominium Corporation which effectively make up the monthly maintenance fee are subject to HST, and therefore monthly maintenance fees will be affected. Most condominium property managers have estimated that the effect of the HST will result in an increase of approximately 6 – 8 per cent on monthly condominium, co-operative, and co-ownership residential fees.

Buyers of new houses will not have to pay HST for homes costing up to $400,000.00 in Ontario, as a result of the Ontario government providing a rebate of up to $24,000.00 for those purchasers buying newly-built homes and the existing GST credit. The net HST will be payable for houses costing more than $400,000.00. This means that, if a new house costs $500,000.00 the buyer will actually be paying HST on the $100,000.00. Ontario will charge 2 per cent on the first $400,000.00 of purchase price and 8 per cent on the next $100,000.00; resulting in tax in the amount of $16,000.00, whereas Ottawa on the other hand will charge 5 per cent tax on every dollar of the purchase price, resulting in a federal tax bill of $25,000.00 on a house costing $500,000.00.

The HST is being charged on new homes where the Agreement of Purchase and Sale is signed after June 18, 2009 and the actual title is transferred after June 2010. If Buyers entered into an Agreement of Purchase and Sale before June 18, 2009 they are exempt from the HST even if they close after June 2010, subject to certain transitional rules and provisions. The following chart is a basic summary of the HST Transitional Rules.

Martin K. I. Rumack is a Toronto based Barrister and Solicitor and is a regular contributor to the Muddy York Blog. Contact Information:  202 – 2 St. Clair Avenue East, Toronto, Ontario, M4T 2T5, Tel:  (416) 961-3441 (Ext. 26). Mr. Rumack can be mailed directly at martin@martinrumack.com.

The Harmonized Sales Tax (HST) is finally here, and in British Columbia. But, there are some extreme differences between Ontario’s HST and British Columbia’s HST. What’s going up in price is pretty much determined by which province you currently reside in. We’ve covered HST and home buying, but many other costs from home maintenance to heating will also feel the HST pinch.

Previously, we had to pay 13 per cent taxes on most retail purchases, a combination of 5 per cent GST and 8 per cent PST. Now, HST is replacing PST and GST with a new 13 per cent tax. It’s the same amount, but now it’ll be applied to things that only previously had the 5 per cent GST applied, like landscaping, snow removal and gasoline.

One of the most noticeable new charges for people living in Ontario is the 13 per cent HST tacked onto gasoline charges when they fill up their cars. They’ll also feel it when they open their energy bills, because home heating oil, hydro and natural gas will also be applicable to HST. British Columbia won’t be seeing HST added to any of those, but will have a separate carbon tax added to energy.

Both provinces’ real estate HST changes are essentially the same, with HST being added to new homes of certain prices, but only Ontario homebuyers will receive HST rebates of up to $24,000 on their purchases.

HST in Ontario is now added to legal services, and British Columbia will be adding HST to snacks, over the counter medication and even plants and trees that produce food.

The five per cent GST will remain in effect on some things they were previously subject to such as food, children’s clothes and shoes under $30.   Enjoy the new tax!