Receiving a GST/HST new housing rebate can mean a substantial chunk of money back in a real estate investors pocket to re-invest. However, the new housing rebate forms and process has some built-in difficulties that can mean the money that should be coming to you will stay firmly in the government’s hands.
While the process can look straightforward, getting a professional advisor, a real estate accountant, involved to help you complete the new housing rebate forms can be a very good investment to avoid some of the hidden traps related to the type of rebate, and the timing of rebate applications.
1) Rebate reviews by CRA
The first thing you must know about new housing rebates as a real estate investor is that the Canada Revenue Agency is reviewing every application. They will deny the rebate for many reasons, but common ones include:
- Submitting the wrong application
- Not occupying the home as the applicants (or a relative) as their principal residence
- Not having a one-year lease on rental properties
- Not leasing a property to an individual
To put this in perspective, from April 2015 to June 2016, the CRA audited 9,069 rebate applications, and recovered $117.3 million. That is an average of $12,934 recovered per rebate application audit. So, the audit process is very lucrative for the CRA, and will continue to be a focus area. Having the correct form filled out properly with backup materials is absolutely critical.
2) Types of rebates
Three types of rebates are available, depending on your circumstances. You must send in the correct form, or the rebate will be rejected.
New Housing Rebate
- Available where an individual(s) purchases a newly constructed home from a builder
- Home includes a single residence (land and building) a condominium unit or a permanently affixed mobile home
- Rebate available to the purchaser and can be offset against the purchase price of a home
New Residential Rental Rebate
- Available to the purchaser of a newly constructed home where it is to be rented to an individual as their primary residence
- Rebate available on newly constructed multi-unit residential complexes with three or more units
- Purchaser can include an individual, partnership, corporation, etc.
- Rebate cannot be offset against the purchase price, the purchaser must apply separately for the rebate
Owner Built Rebate
- Available to an individual that has an interest in the property before substantial completion occurs
- Rebate is available on new construction or for a substantial renovation (the definition of a substantial renovation is completely subjective so an often audited point)
- Rebate calculated on GST/HST incurred on labour and materials
3) Time limits
You have a two year time limit for submitting a rebate application. If you submit the wrong application, then the two year limit may have expired by the time the CRA processes it, discovers the error in the application, and you have to reapply. So you must ensure that you have the right rebate the first time to be safe.
4) Rebate maximums
The maximum rebate available in most provinces is $6,300, however in Ontario an additional $24,000 rebate is available. So, depending on your circumstances, this could be a significant amount of money that can “disappear” if you provide the wrong paperwork.
We strongly encourage you to work with a real estate accountant who is comfortable with the GST/HST New Housing Rebate process so you can avoid any pitfalls, ensure you meet the time limits, and ensure you pass through the CRA review process unscathed.
Scott Merry, CPA
Partner, Indirect Tax
You can contact Scott and his team at email@example.com for help with your rebate applications.Tags: audits, cra, rebates
My in-laws purchased a new condo that is currently being built albeit the delivery date is delayed by months. They received the new housing rebate from the builder as this will be their primary residence. Since the move-in date is now pushed into 2020, they had to rent an apartment meanwhile. My question is what happens to their rebate if they choose to stay in the rental unit and instead rent the condo when construction is completed? Will they keep it? Do they need to instead apply for residential rental rebate? Please advise.
If your parents decide to rent out the condo instead of moving into the unit they will not be entitled to claim the New Housing Rebate but as you suggest they should be entitled to claim the New Residential Rebate. From a practical perspective the next steps are, first the builder will not be able to accept the New Residential Rebate application from your parents so the funds required at time of closing will be increased by the amount of the embedded New Housing Rebate in the original purchase and sale agreement. Your parents will be required to complete and submit the New Residential Rebate application on their own account. The rebate amount should be the same value as the New Housing Rebate.
There are a couple of other issues that have surfaced more recently in respect of condo purchases that your parents should seek advice on as well.