The New Housing Rebate: How to Deal with the Issue of Primary Place of Residence from a Canadian Tax Lawyer Perspective

New housing rebate: What is it?

Anyone who buys a new house or condo from a builder or who hires a builder to build a new home is eligible for the new housing rebate. It enables people to reclaim a portion of the HST they have already paid, but the home must be utilized as their principal residence or that of a family member. Keep in mind that if an individual co-owns the housing with someone who is not an individual, the rebate is not available to them. A corporation or a partnership cannot apply for this reimbursement, either.

Requirements for claiming the new housing rebate

The requirements for a person to claim the new housing rebate are outlined in subsection 254(2) of the Excise Tax Act, which are as follows:

• Through the sale (taxable supply) of a residential complex or unit to another individual by a builder;
• When assuming responsibility under the purchase and sale agreement, the person who is purchasing the apartment building or individual unit intends to use it as his or her primary residence;
• The purchase price is less than $450,000 before tax is paid for residential unit or complex;
• The specific person has already paid all Division II taxes due in connection with the supply of the complex or unit;
• After construction or major renovations are mostly finished, ownership of the complex or unit is handed to the specific person;
• It was only occupied by the person or a relation of an individual after the construction or substantial refurbishment is substantially done and before possession of the complex or unit is granted to the specific individual; and,
• The specific person or a relative of the specific person must be the first person to reside in the complex or unit.

To sum up, the following conditions are required in order for the purchase to qualify for the new housing rebate:

1. When the property was purchased, he or she expected to use it as either his/her or a relative’s primary residence;
2. Between the time the property is substantially finished and the time the specific person acquires it, no one may live there; and,
3. The specific person or a relative of that person must be the first to live on the property.

How the primary place of residence is determined

A person may have more than one place of residence, and the GST/HST Policy Statement P-228 outlines the intention test to identify a person’s primary residence. In essence, a person must show that they intended to utilize the property as their principal residence. The intent to utilize the property as a primary residence does not have to be the primary goal. The intention test would be satisfied, for instance, if a buyer intended to use a property as his or her primary residence in addition to buying it primarily for resale.

An individual is not ineligible to get the rebate if an intervening incident prevented them from moving in

Case law provides that where there was an intervening occurrence, and that occurrence prevented the person from using the property as his or her principal residence individual is not ineligible to receive the rebate. 

In the case of Boucher v The Queen, the involved taxpayer initially resided in Montreal but had a home constructed in Val-Bélair. Unfortunately, after moving to Val-Bélair, the taxpayer’s wife was unable to find employment there but succeeded in finding a job in Montreal. The taxpayer and his wife consequently sold the new home and returned to Montreal. The taxpayer and his wife only stayed at the new home for four months, the court concluded, but only because of the circumstances surrounding his wife’s new employment did they feel compelled to return to Montreal. As a result, they were still eligible for the new housing rebate.

In Gagné v. The Queen, the taxpayer first resided in Montreal but later bought a home in Rivière-Rouge in order to relocate for work. However, the taxpayer’s wife developed health problems before the relocation and needed specialized care. They waited three years to relocate to the new property as a result, after it had been substantially finished. The court determined that even though the taxpayer’s wife never changed her mailing address or phone number to the new home, she did intend to use it as her primary residence because she stated as much in her loan application for the new property. They shouldn’t be ineligible for the rebate because they delayed their application for three years.

Tax pro tips – intent must be shown by competent evidence

Evidence such as a change in mailing address or phone numbers, the amount of time spent at each residence, and the suitability of the property for the individual’s use—especially if there are multiple residences—must be presented to show that the individual intends to use the property as his or her primary place of residence. It is typically advised to speak with an expert Toronto tax lawyer to assess the merits of your tax rebate claim, particularly when an intervening circumstance compelled you to alter your original plan.

FAQs

What conditions must be met to be eligible for the new housing rebate?

The requirements are as follows from the perspective of the buyer:

1. When the property was purchased, he or she expected to use it as either his/her or a relative’s primary residence;
2. Between the time the property is substantially finished and the time the specific person acquires it, no one may live there; and,
3. The specific person or a relative of that person must be the first to live on the property.

When a person has many residences, how would the CRA determine his or her primary residence?

The following factors are typically examined by the CRA:

• the duration of time spent at each residence;
• the place of employment of the individual or any qualified relatives;
• the accessibility of amenities specific to the needs of the person (or qualified relative); and
• the property’s appropriateness for usage by the person (or qualifying relative).