A number of readers have expressed concern over the documents in the Agreement of Purchase and Sale relating to GST. Today, virtually all builders include GST in the purchase price. There are standard clauses in the Agreement of Purchase and Sale assigning the GST rebate to the builder. In addition there will be clauses that indicate, if for some reason the Purchase does not qualify for the GST rebate, the Purchase not only will be required to pay the GST but an additional amount equal to the rebate, to the Builder.

In order to qualify for the rebate the purchaser(s) will have to swear they are the Purchasers and they are acquiring the property to be their primary place of residence for the purpose of Section 254 of the Excise Tax Act of Canada. In addition they will have to certify that all books and records relating to the transaction are available for inspection, the rebate was for a newly constructed or substantially renovated residence and that at the time of possession the premises were for the Purchaser’s use or for the use of a relation as a primary place of residence.

Many people become worried about the whole GST issue. As long as your settled intention is to reside in the home after Closing, you will simply execute the appropriate paperwork and the issue will have no effect overall on your purchase. It is only if you are buying for investment purposes or through a holding company that you will run into issues that will require advice and recalculation as to your responsibilities for GST.

Until such time that legislation dealing with the rebate is in place or during periods when it needs to be renewed the Land Transfer Tax (LTT) Refund must be applied for and is available to certain qualified individuals. Remember that means you need to have the money available to pay it on Closing!!!!

The LTT Refund only applies for the first $1,725 of LTT payable and that means you will pay some LTT on all homes costing more than $200,000. In order to qualify for the exemption or rebate you must meet the following criteria:

1) be at least 18 years old;
2) never owned an eligible home as defined in OHOSP Act (which is any kind of home ie., condo, detached, semi, etc. anywhere);
3) not have a spouse who has owned an eligible home as defined in OHOSP Act while he or she was a spouse of the home purchaser;

If these criteria are met you may apply for the rebate.

The calculations are as follows:

Up to a purchase price of $55,000 LTT = 1/2 of 1% of the purchase price net of GST

Up to a purchase price of $250,000 LTT = 1% of the purchase price minus $275 net of GST

Up to a purchase price of $400,000 LTT = 1.5% of the purchase price minus $1,525 net of GST

Over $400,000 LTT = 2% of the purchase price minus $3,525 net of GST

Jayson Schwarz is a senior partner with the firm Schwarz Gillen Barristers and Solicitors. He can be reached at (416) 486-2040.