Introduction
Bill C-4, Making Life More Affordable for Canadians Act, which has not yet received Royal Assent, proposes the additional new GST housing rebate. The legislation refers to this rebate as the additional new housing rebate to differentiate it from the existing new housing rebate. Throughout this article, we will refer to the additional new housing rebate as “the additional rebate” and the older new housing rebate as “the original rebate.”
This new rebate will cover up to $50,000 of GST or the federal portion of HST on the purchase of a new home by a first-time home buyer. If the home’s value does not exceed $1 million, the additional rebate would fully refund the GST on the home. A partial rebate is available for homes valued between $1 million and $1.5 million. The original rebate only covers 36% of the GST paid, up to a maximum of $6,300 — much less than the additional rebate.
Moreover, the original rebate only applied on new properties costing $450,000 or less likely a rare occurrence today, especially in some of Canada’s most expensive housing markets. Given that the new additional rebate is more lucrative and covers much higher valued homes, presumably many more individuals will be utilizing this additional rebate compared to the original one.
This article is intended to provide you with an overview of the amendments to the Excise Tax Act (ETA) that are proposed by Bill C-4.
Additional rebate conditions (purchased from builder)
Presumably the most exercised provision for the additional rebate will be s. 254(2.1), which applies to a home purchased from a builder. Separate provisions apply where the property is acquired on leased land, is owner-built, or is a share in a cooperative — each is discussed below. Paragraphs 254(2.1)(a) — (e) specify several conditions to qualify for the new rebate.
The first condition requires the individual to qualify for the original rebate under s. 254(2), or that they would qualify if dollar limit was read as $1,500,000 (rather than the actual limit of $450,000).
Second, the agreement of purchase and sale must be entered into after May 26, 2025.
Third, the construction or substantial renovation must begin before 2031 and be substantially completed before 2036.
Fourth, ownership of the home must be transferred to the individual before 2036.
Last, 254(2.1)(e) requires that:
- When the individual becomes liable under the agreement of purchase and sale, they are acquiring the home for use as their primary place of residence (note that buying a residence for a relation, a child for example, will not qualify);
- They are the first individual to occupy the home as a place of residence after construction or substantial renovation;
- They are a first-time home buyer at the time ownership is transferred to them.
The “first-time home buyer” requirement is notably a condition that did not apply to the original new housing rebate. According to the definition in s. 123(1), as proposed by Bill C-4, “first-time home buyer” requires the individual to be, at the time ownership is transferred, 18 years of age or older and a Canadian citizen or permanent resident. Also, throughout the 5-year period immediately before the particular time, the individual cannot have resided in a home (including those situated outside Canada) that was owned by them or their spouse or common-law partner.
As with the original rebate, the additional rebate can be assigned to the builder who will apply for the rebate on the buyer’s behalf and credit or pay the rebate to the buyer.
Additional rebate calculation
If total consideration paid in respect of the home does not exceed $1 million, the rebate is equal to the lesser of $50,000 and total tax paid with respect to the home, minus the amount of any original rebate under the individual is entitled to under s. 254(2).
If total consideration exceeds $1 million and is less than $1.5 million, the rebate is determined by the following formula:
C x [($1,500,000 – D) ÷ $500,000]
C is the lesser of $50,000 and total tax paid with respect to the home.
D is the total consideration.
The $50,000 rebate is reduced by 10% of the amount of consideration in excess of $1 million. For example, for a home purchased for consideration of $1.25 million, the rebate would be $25,000. Accordingly, the rebate entitlement is zero when total consideration is $1.5 million or more
Other rules to consider
In the not uncommon event that more than one person is acquiring a new home, s. 262(3) provides that any references to an individual should be read as references to all the individuals as a group for the purpose of the original rebate. However, proposed s. 262(3)(c.1) would modify the wording of the provisions applicable to the additional rebate to refer to any individual in the group. Consequently, at least one group member must meet the conditions under (i) to (iii) above. Per proposed 262(3)(e), only one group member may apply for the additional rebate and it must be a person who meets these three aforementioned conditions. Interestingly, another group member could separately apply for the original new housing rebate.
Very generally, new s. 263.3 would ensure that if an individual has claimed the additional rebate, another additional rebate cannot be subsequently claimed by the individual nor their spouse or common-law partner.
Proposed s. 263.4 is intended prevent an agreement of sale entered into before May 27, 2025, from being varied, altered, or assigned such that it would be entered into after May 26, 2025, in order to access the additional rebate.
Building-only rebate
Section 254.1 of the ETA provides the housing rebate to an individual who acquires a home or a residential condominium if the individual leases the land from the builder on a long-term basis or with an option to purchase. The additional rebate with respect to such situations will be provided by new s. 254.1(2.1). The conditions and calculations are largely the same as those discussed above for s. 254(2.1)(a)-(e).
Note, however, that the amounts used in the conditions and calculations are slightly different from the rebate under new s. 254(2.1). These amounts can also differ if the home is situated in a participating province. New s. 42.1 of the New Harmonized Value-added Tax System Regulations, No. 2 prescribes the appropriate amounts to be used. Also note that the calculation of this additional rebate depends on fair market value rather than total consideration that is used under “Additional Rebate Calculation.”
Housing cooperatives
Section 255 of the ETA provides a new housing rebate with respect to the purchase of a share in a cooperative housing corporation for the purpose of using a new unit as a primary residence. New ETA s. 255(2.1) would be added to extend the additional rebate to such circumstances. The conditions and calculations are largely the same as those discussed above for s. 254(2.1)(a)-(e).
Note, however, that the amounts used in the conditions and calculations are slightly different from the rebate under new s. 254(2.1). If the home is situated in a participating province, new s. 44.1 of the New Harmonized Value-added Tax System Regulations, No. 2 prescribes different amounts to account for the tax rates that apply in participating provinces.
Owner-built homes
Section 256 of the ETA provides a new housing rebate to an individual who builds or substantially renovates the home. New s. 256(2.1) would provide for the additional rebate specifically for these circumstances. Again, the conditions are largely identical to that of the additional rebate discussed above, but there is a slightly different formula for the rebate’s calculation.
The additional rebate for owner-built homes would also include purchases and imports of mobile homes and floating homes, per a proposed amendment to s. 256(2.2).
