Backgrounder: The Enhanced New Housing Rebate, New Rental Housing Rebate and Transitional Rules
The 2009 Ontario Budget introduced a comprehensive tax package--including the proposed single sales tax, tax cuts for business and significant tax relief for people--which is designed to boost Ontario's competitiveness and position the economy for long-term strength. The province is proposing measures that would build on the comprehensive tax package, subject to legislative approval. These proposed measures would help Ontarians buying new homes and support a strong housing industry.
ENHANCED NEW HOUSING REBATE
The province is proposing an enhancement to the new housing rebate that was announced in the 2009 Ontario Budget. The new housing rebate would be enhanced so that new homes purchased as primary residences across all price ranges would receive a rebate of up to $24,000, while continuing to ensure that, on average, new homes priced up to $400,000 would not be subject to additional tax compared to the retail sales tax (RST) currently embedded in the price of new homes.
The enhanced rebate would effectively apply the provincial portion of the single sales tax at a rate of two per cent on the first $400,000 of the purchase price of a new home and at a rate of eight per cent on the portion above $400,000. The rebate would be calculated as 75 per cent of the provincial portion of the single sales tax payable on the purchase of a new home, up to a maximum rebate of $24,000.
This provincial rebate for new housing would be provided for the same types of new residential properties for which a Goods and Services Tax (GST) new housing rebate is available. Qualifying housing would include substantially renovated housing, co-operative housing, owner-built housing, housing on leased land, mobile homes and modular homes for use as primary places of residence.
Ontario's new housing rebate would be federally administered in a manner similar to the GST rebate for new housing. Individuals would be able to file an application for the rebate directly with the Canada Revenue Agency (CRA) if the builder does not pay or credit the rebate to the purchaser at the time of purchase.
NEW RENTAL HOUSING REBATE
To support affordable rental housing in Ontario, the province is proposing to provide a rebate for new rental housing, similar to the proposed rebate for new homes.
The rebate would effectively apply the provincial portion of the single sales tax at a rate of two per cent on the first $400,000 of the purchase price of a new rental home and at a rate of eight per cent on the portion above $400,000.
The proposed rebate would be available for new rental housing, including investment properties to be rented out, for use as primary places of residence. This rebate would apply across all price ranges up to a maximum rebate of $24,000, while ensuring that, on average, new rental housing priced up to $400,000 would not be subject to additional tax compared to the RST currently embedded in the price of new rental housing.
Similar to the GST rebate for new residential rental properties, qualifying housing would include substantially renovated rental housing, co-operative rental housing, additions to traditional apartment buildings, long-term residential care facilities, rental mobile homes and rental modular homes for use as primary places of residence. The rebate would also be available for leased land where the land is used for residential purposes.
TRANSITIONAL RULES FOR RESIDENTIAL REAL PROPERTY
To help homebuyers and builders transition to the proposed single sales tax, transitional rules would be provided for new housing transactions that would straddle the single sales tax implementation date of July 1, 2010.
Generally, builders' sales of newly constructed or substantially renovated homes would be subject to the single sales tax where both ownership and possession of the home are transferred after June 2010. Grandparenting would be provided for certain contracts.
The proposed transitional rules for new housing, including builder reporting and disclosure requirements, would be administered by the CRA.
Generally, sales of new homes under written agreements of purchase and sale entered into on or before June 18, 2009 would be grandparented, such that these sales would not be subject to the provincial portion of the single sales tax.
Builders would be able to recover the provincial portion of the single sales tax payable on most purchases, as under the federal GST, with limited exceptions. However, for grandparented homes, builders would generally be required to pay an amount to adjust for tax that would have otherwise been embedded in the new homes, on average, under the current RST regime.
RST Transitional Housing Rebate
New homes completed in full or in part prior to the implementation date of the proposed single sales tax would have RST embedded in the cost of the homes. For new homes that are subject to the provincial portion of the proposed single sales tax after June 2010, an RST transitional housing rebate would be available to provide relief in respect of the RST embedded in the home.For further information, please refer to the technical bulletin.