The New HST: What It Means To You.

July 1, 2010: Be sure to note that date in your Blackberry, iPhone or gadget du jour. This is the date that the new provincial harmonized sales tax (HST) is set to come into effect. In the simplest sense the HST combines the 8% PST and the 5% GST into one 13% HST. This extra 8% will apply to a list of goods and services that were previously exempt from PST.

One large item of interest will be new construction homes. New construction homes have been subject to GST since its introduction in the early 1990’s. The government did create a GST Rebate to first time home buyers of new construction to help ease the burden. With the introduction of the HST, there is an additional 8% tax added onto the price of a new construction home.

To help offset this cost, the government has created the New Housing Rebate. The rebate will be 75% of the provincial portion of the HST payable on the purchase of a new home, up to a maximum rebate of $24,000 (i.e., $400,000 purchase price × 8% provincial component = $32,000 ×75% rebate = $24,000). This results in a maximum rebate of $24,000 if a vendor spends $400,000. A recent update in legislation has made the rebate available to homes of any sale price, to a maximum of $24,000.

What will the HST mean to Ontario resale home purchasers and sellers?
Should you be purchasing or selling a home on or after July 1, 2010, it makes sense to budget an additional 8% more for legal fees, moving costs, real estate commissions, appraisals and home inspection fees to name but a few. The Ontario Real Estate Association estimates that an additional $1,449 in new taxes would be added to a transaction for a home valued at $302,354. This is estimated to add $262 million in new taxation of resale homes annually in Ontario. Even if you are not planning a move in the next couple of years, all homeowners need to take note.

The 8% PST increase in taxation will apply to services required to maintain your home as well. Many of these services would have previously been exempt from PST including utilities, home renovation labour, landscaping, snow removal and more. Should you be renting, you may think that the HST increase would not apply to you. Please take a step back and think about whether your landlord will be willing to take an 8% increase in operating costs or whether he or she might pass as much of that along to you as possible. In fact, condominium residents will experience a similar effect with maintenance fees as these 8% cost increases will need to be passed along or eventually eat away at reserve funds.

Love it or Hate it, the HST is going to be a Canadian reality as of July 1, 2010. (I have an idea which way you might be leaning.) Be aware of the looming increased costs and make smart decisions with the money you have in hand.

Please feel free to call me direct if I can be of any further assistance: 905-330-1241.

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