HST Myths vs. Facts
Although it doesn't come into effect until July 1, 2010, the public is under a number of misconceptions regarding how the HST applies to the sale of homes and real estate services. Here are some common public myths about he HST and how it applies to real estate:
MYTH: The HST applies to homes that "look and feel" new - one or two years old and listed for the first time on the MLS(R) after having been sold once by the developer.
FACT: The HST applies to new homes being sold for the first time and homes that have been substantially renovated (90% or more), similar to the current application for the GST on new homes. The purchase agreement has to be signed after November 18, 2009, with possession dated on or after July 1, 2010
MYTH: The HST is a new tax burden of 12% on new homes worth more than $525,000. A typical new detached home in White Rock ($800,000) will cost $96,000 more after July 1, 2010 (not even factoring in the Property Transfer Tax).
FACT: After July 1, 2010, a new $800,000 home in White Rock will cost $11,510 more than it would have cost on June 30. First, the 5% GST has always applied to new homes. Second, the provincial HST rebate of $26,250 is available for the purchase of all new homes worth more than $525,000, even much higher-priced homes. See the following calculation taking into account the PTT as well.
| Current | After July 1 | ||
|
Purchase Price |
$800,000 |
Purchase Price less 2% embedded PST |
$787,000 |
|
GST (5%) |
40,000 |
HST (12%) |
94,080 |
|
PTT |
14,000 |
PTT |
13,680 |
|
HST Rebate |
(26,250) | ||
|
Total Cost |
$854,000 |
Total Cost |
$865,510 |
MYTH: Everything to do with my new home will be levied by the HST.
FACT: Not
everything will be impacted by the HST.
YES - HST will apply to all fees for professional services in the
purchase or sale of a new OR resale home (as does the 5% GST now).
Therefore, all of these services will cost 7% more.
NO - Home insurance is exempt from the HST.
NO - home heating fuels are all eligible for a point of sale rebate
and will see no impact from the HST.
NO - Furniture and electronics will see no tax change. The 12%
(GST and PST combined) already applies to furniture and electronics,
therefore buyers will see no difference.
It is important for the public to know that although the tax burden on housing is set to increase on July 1, it would have been worse had it not been for REALTORS(R) and other representatives in the housing industry. BCREA successfully lobbied to mitigate the impact of the HST - getting the threshold increased to $525,000 from $400,000 and the HST rebate raised to $26,250 from $20,000.
Need help calculating the HST and available rebates on a new home? The Ministry of Finance has just launched a New Home HST Calculator accessible via their website under Helpful links (click here)
Disclaimer: Information is taken from "The newsletter for Fraser Valley REALTORS(R)", May 10, 2010 Issue 5519
