July 1st is fast approaching and that means the HST will be here, in full force. There is plenty of news surrounding the implementation of this revised tax, but are you really prepared for it? How will it affect your home buying and selling experience?
The government has released general transition rules with regard to the HST and how it will apply to Realtors’® services. It is assumed that the commissions on a sale become due when the property is sold or leased and the portion that is subject to HST is determined to the extent, expressed as a percentage, that the services are performed on or after July 1, 2010. However, if 90% or more of the services are performed before July 1, 2010, the HST will not apply.
For example, a Realtors’® services are performed from June 1, 2010 to July 2, 2010 with the sale of the property closing on July 2, 2010. The Realtors’® commission becomes due at that time of closing. More than 90 per cent of the Realtors’® services were performed before July 1, 2010. In these circumstances, the GST at the rate of five per cent will apply to the REALTORS® services. In another example, a Realtors’® services are performed from May 1, 2010 to July 31, 2010 with the sale of the property closing on July 31, 2010. The Realtors’® commission becomes due at that time. In this case, two thirds of the services were performed from May 1, 2010 to June 30, 2010 and one third of the services were performed from July 1, 2010 to July 31, 2010. The Realtors’® will charge GST on two thirds of the amount charged for the services and HST on the remaining third.
HST highlights
• Starting July 1st, the HST will be in effect in Ontario.
• Purchasers of newly constructed homes for primary residences up to $400,000 would not, on average, be subject to an additional tax burden in view of the new housing rebate up to $24,000.
• There is a new rental housing rebate, similar to the enhanced new housing rebate, for new residential rental properties.
• For new homes constructed in full or in part prior to July 1, 2010 that are subject to the HST on or after July 1, 2010, a PST transitional housing rebate is available to provide relief in respect to the PST embedded in the home.
• HST will not be applicable to a used residence for re-sale.
• For those who sell their home in Ontario, there will be a 13 per cent tax payable on the real estate commission (an eight per cent increase on top of the current five per cent.).
• Lawyer’s fees will also be subject to the 13 per cent HST in Ontario, as will the cost of a Condominium Status Certificate, however the total cost of that status certificate will remain at $100.
• Moving costs, the cost of a home inspection and even home staging will increase to reflect the HST.
There will be some room to discuss whether you will owe HST on the commission paid when you buy or sell a home in Ontario. Each individual transaction will need to be reviewed and a decision made on the particular circumstances surrounding the sale or purchase. Stay tuned here, for the most up-to-date information.
June 11th, 2010 at 10:34 pm
Aw, this was a really quality post. In theory I’d like to write like this too – taking time and real effort to make a good article… but what can I say… I procrastinate alot and never seem to get something done.