GST on Assignments and Resales
Whether you’re buying or selling a home, you’ve probably wondered about GST. Although GST only applies to brand new or substantially renovated homes, there are some caveats when it comes to assignments and resales.
What is an assignment?
An assignment occurs when the purchaser transfers their rights in the purchase contract to someone else before the completion date. Assignments are most commonly found in presale condo and townhome communities where a buyer will enter a contract with the developer prior to construction of the home being completed. For many new home buyers, presales are an ever-attractive option, allowing them to only pay the deposit upfront.
What are the tax implications on assignments?
When purchasing a presale home, the buyer is also responsible for both the PST and GST on the cost of the home, and GST on the assignment amount (which is often already included). That being said, some buyers may qualify for a GST/HST new housing rebate if the property will be their primary residence and if the purchase amount is under $450,000.
Head’s up! If you’re looking to learn more about how GST can be applied in various assignment scenarios, Canadian Real Estate Wealth Magazine has a great blog post with some real-life examples.
What are the tax implications on resales?
When it comes to resales, on the other hand, the seller’s intent determines whether GST is applicable. For example, if the seller originally purchased the home as their primary residence, then GST wouldn’t apply. If, however, the seller purchased the home with the intent to renovate and resell, then they are legally considered the ‘builder’, and GST would be applied.
If you’re purchasing a resale home, it’s important to know whether the seller can also be considered the builder. Ensuring that your contract clearly states the seller’s intent can be crucial in determining whether or not you’re on the hook for GST.
Ultimately, when it comes to real estate, taxes can be quite complex. For this reason, it’s important to discuss potential tax scenarios with your realtor and/or lawyer prior to entering a contract to buy or sell a home.
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