One of the cool tools I have available as a blogger is a report I can access which shows the most frequently used key words that land people on my blog. It’s always a surprise to me to see what is on peoples mind – “aluminum wiring”, “value of a corner lot” , “best Thai food in Collingwood” all ranked very high last month with hundreds of searches in each of those categories. But the number one searched item for the last 8 months has been about HST.
The Ontario Government’s new Harmonized Sales Tax ( HST) will take effect on July 1st. Happy Canada Day! The HST tax will effectively combine the provincial sales tax (PST) of 8% with the federal goods and services tax (GST) of 5% to create a new harmonized sales tax of 13% (HST). The new tax will apply to some real estate services associated with the real estate transaction which only had PST or GST applied previously.
Let’s start with new homes. Generally speaking, the new HST will have the greatest impact on new homes sales priced over $400,000. Homes purchased as primary residences across all price ranges would qualify for 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. Transitional rules are rather complicated and new home Buyers are well advised to seek out expert guidance. This Ontario tax bulletin is a good starting point.
Importantly, Buyers need to know that the purchase of new secondary homes such as ski chalets, cottages and recreational condominiums WILL BE subject to the full HST with no rebate as explained in this article from the Toronto Star last month.
While HST is NOT applicable on the sale price of resale homes, the new tax will have an impact through other services that are part of the transaction.
After July 1st, Sellers will need to pay 13% HST on real estate commissions instead of the current 5% GST payable on this fee. Lawyer’s fees for both Buyers and Sellers will also be subject to the 13% HST as will the cost of condominium status certificates, energy audits, moving costs, title insurance and home inspection fees. Currently the 5% GST is payable on these services as well.
Contrary to what was widely reported earlier, changes have taken place that means the full 13% HST will NOT be charged on insurance premiums for high-ratio mortgages (mortgages with down payments of less than 20%) however, they will continue to be taxed at the current 8% PST rate.
Services for maintaining a home will also be HST taxable as of July 1,2010. Things such as utilities, home renovation labour, lawn upkeep or landscaping services, snow removal and a portion of your maintenance fees if you own a condo will all become taxable at the 13% rate. The Ontario Real Estate Association estimates that HST will add $480 in annual tax if you are budgeting $500 per month on such costs.
If you are wondering what’s taxable and what’s not, take a look at this extensive list of common products and services affected by the HST.
Marg Scheben-Edey is a Broker with RE/MAX four seasons realty limited, Brokerage in beautiful Collingwood, ON. With three decades of experience, Marg is a leader in the local real estate marketplace and is ready to help guide both Buyers and Sellers in achieving their real estate goals. Email Marg