HST New Housing Rebate

Posted By: Bobby B. Solhi on March 12, 2013 at 3:11:23 in All

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HST New Housing Rebate—the Importance of Intention

By: Bobby B. Solhi, J.D. and Jonathan Crangle

In a recent decision of the Tax Court of Canada in Wong v The Queen the Court ruled on whether the Appellant, Ms. Wong, was eligible for the HST New Housing Rebate.

In Wong, the taxpayer claimed an HST New Housing Rebate (the “Rebate”) on the purchase of a newly constructed residential property which was disallowed by the Canada Revenue Agency (“CRA”).  Ms. Wong appealed to the Tax Court of Canada where her claim was dismissed.  While the Appellant was not successful in this particular case, Wong was a noteworthy decision because the Court directly held that whether an individual had the intention to make the property their home is to be determined at the time the Agreement of Purchase and Sale was signed by the purchaser – not at the time of closing or anytime after that.

Learn more about HST Rebates and the HST New Housing Rebate.


Put simply, the HST New Housing Rebate allows a purchaser of a newly constructed or substantially renovated home to recover a portion of the GST/HST paid on the purchase price of the home.  To qualify for the rebate, there are numerous conditions, the one condition we will focus on is that the property must have been purchased with the intent to reside there as the purchaser’s, or a relative’s, primary place of residence.

Following Ontario’s decision to harmonize the provincial sales tax with the GST and form the HST, there were provisions incorporated into the Excise Tax Act (“ETA”) that extended the New Housing Rebate to the provincial portion of the HST.  This was meant to offset, to a large extent, the additional cost of purchasing a new home in Ontario following harmonization.  Now, a few years removed from harmonization (July 1, 2010), the Canada Revenue Agency (“CRA”) has been actively challenging many Rebate claims on the basis that basic requirements to qualify, such as intent to reside as primary residence, have not been met.

Please note that a new housing rebate is also available for new residential rental properties and owner-built homes, which are, however, not discussed in any detail in this post.

Overview of the HST New Housing Rebate

Section 254 of the ETA provides for a partial rebate of the federal taxes paid to purchase a new home. There is a maximum rebate of $6,300 that is available on the federal portion of the GST (5%).  The rebate amount is clawed back where the purchase price exceeds $350,000 and disappears entirely where the purchase price is $450,000 or more.

There is also a New Housing Rebate for the Ontario portion of HST (8%) under the New Harmonized Value-added Tax System Regulations, No. 2.  In general, an individual who qualifies for the federal New Housing Rebate also qualifies for the provincial rebate. The Ontario New Housing Rebate is available regardless of the purchase price and a maximum rebate of $24,000 is available with no claw-back.

Paragraph 254(2)(b) of the Excise Tax Act requires that the purchaser intend to use the unit as a primary residence or for a relative at the time they become liable or assume liability under an agreement for purchase and sale of the unit.  As noted above, the CRA has been actively reviewing Rebate claims to ensure that claimants purchased the home with intent to use it as their primary place of residence, or that of a relative.

What happened in Wong ?

Mr. and Mrs. Wong purchased a pre-construction condominium in Vancouver. At the time of purchase, they owned and occupied another property that they intended to continue occupying as their primary residence.  The condo took several years to be completed and for the transaction to close. When it was finally completed the taxpayer’s son occupied the property briefly, for about a month, while visiting before moving back to the United States for school.

Mrs. Wong claimed the Rebate on the basis that it was purchased with the intention to reside as a primary place of residence for her son. The Minister of National Revenue denied her claim on the basis that the property was not purchased with the intent that she or a relative would reside there as a primary place of residence.   Unfortunately, it was only at this point, when the CRA was in contact regarding her Rebate claim, did Mrs. Wong try to create the impression that she was residing at the property by changing the address on her driver’s licence to that of the property and sent a copy to the CRA.  The CRA did not accept her claim and sent a notice of reassessment denying the Rebate.

At the Tax Court, Paris, J.  dismissed Mrs. Wong’s appeal on the basis that she did not intend to use the property as a primary residence at the time she signed the agreement of purchase and sale.  Therefore, the conditions to qualify for the rebate were not met.  The taxpayer argued that she purchased the property for her son so that he could reside there as his primary place of residence but the Court found that to be highly implausible since he was attending school full time in the United States.

Editor’s Commentary

It is important for a purchaser to properly document their intent when purchasing a property as best they can.  It is up to a purchaser to sufficiently document their actions and take steps that indicate they were carrying out an intent to occupy the property as a primary residence. A non-exhaustive list of steps would include documenting the purpose behind the acquisition, receiving mail at the property (bank statements/credit card statements), paying taxes from the property, taking out homeowner’s insurance, paying utilities, or selling another residential property, among others.  Supporting documentation will assist the CRA in determining whether the requirements to claim the Rebate were met.  If the CRA still does not accept the claim, then the next option is for the taxpayer to consider a Notice of Objection.

Audits of HST New Housing Rebates are an active area of concern for the CRA and it would be advisable to seek assistance from a tax professional.

For a case that looked at the importance of evidence to claim the Ontario HST New Housing Rebate, see HST New Housing Rebate – Importance of Evidence.