Transitional HST
2010/07/11 - Originally published in the Vernon Morning Star
Yes, there is such a thing. Homes completed, or semi-completed prior to July 1st, 2010 will qualify for a rebate that will provide considerable assistance. As an example, I have a new home on the market priced at $484,500. It was fully completed by June 30th, 2010. The home qualifies for a transitional rebate of around $9,690. That offsets the expense of the HST so well, that the prospective buyer will actually be no further out of pocket than they would have been, paying only GST. Alternately, if I chose to, I could claim the transitional rebate and lower the price to the buyer. Either way the buyer saves money.
Please don't miss the point here. I am talking only of the Transitional Rebate which applies to homes already built, at least partially, but unsold by July 1st, 2010. The formula varies with the fair market value and the degree the home is finished. Also, owner built homes have different rules.
The formula looks something like this:
Fair Market Value $484,500
12% HST $58,140
Less BC New Housing Rebate $24,225 (for owner occupied homes)
Net Cost Equals $33,915
Actual Purchase Price $518,415
Less Transitional Rebate $9,690
$508,725
2 % x Fair Market Value x percentage finished on June 30th, 2010 = rebate of $9,690
(The buyer can claim this rebate or the builder can claim it and reduce their price accordingly, if they see fit to do so.)
Under the old system of GST this same home would have cost the same price:
Fair Market Value $484,500
GST (5%) $24,225 (no rebate due to the price being over $450,000)
Actual Purchase Price $508,725
So, the HST used along with the transitional rebate, is no more expensive than GST, in this example. (My source for this information was the HST hotline (so, hopefully I was given correct information). That number is 1-800-959-8287, plus an accountant.
Another transitional expense is the HST to be charged on real estate commissions. Many properties have been on the market a fair time before July 1st, 2010. The real estate fees on sales after July 1st, 2010 will be subject to HST, rather than GST. However, your Realtor will be able to fill out a form that outlines what portion of the work in marketing the property took place prior to July 1st, 2010 versus the work that took place after that date. The marketing work performed prior to July 1st, 2010 will still only be subject to 5% GST. 12% HST will only be charged on the services that remained to be performed after July 1st, 2010.
I would like to remind everyone - HST is only applicable to new homes and substantially renovated homes, NOT regular used residential. Please consult your accountant for an explanation of "substantially renovated".
This is a difficult learning curve for us all. Lots of misinformation is out there. If I've done nothing else in this article, but alert you that a Transitional Rebate exists, I have done what I hoped to do. This opportunity definitely softens the blow.
A useful website is http://hst.blog.gov.bc.ca/wp-content/uploads/2010/03/new home HST calulator.x/s
Lean on both the HST hotline and your accountant. They can sort out these questions for you and make it much easier.
Jane Field works with RE/MAX Vernon. Jane has over 30 years experience in the Real Estate business. To suggest topics for future articles or to ask Jane questions, email or call 503-3755.
RE/MAX Vernon | 250.503.3755 | Toll free 1.888.503.3755 | 5603 - 27 ST | Vernon | BC | V1T 8Z5 | Canada
© Jane Field & Louisa Cochrane | All rights reserved.
Logo's are copyright and trademark of their respective companies.
