New Housing Rebate: Guidance from a Canadian Tax Lawyer on the Issue of Primary Place of Residence

What is the new housing rebate?

The new housing rebate is available to individuals who purchase a new home or condo from a builder, or who hires a builder to construct a new house. It allows individuals to recover part of the HST paid, but the home must be used by the individual or the individual’s relation as a primary place of residence. Note that the rebate is not available to an individual if he or she co-owns the housing with another person who is not an individual. Furthermore, neither a corporation nor a partnership can claim this rebate.

Requirements to claim new housing rebate

Subsection 254(2) of the Excise Tax Act sets out the requirements for an individual to claim the new housing rebate:

• A builder made a taxable supply by way of the sale of a residential complex or unit to a particular individual,
• The individual who is acquiring the residential complex or unit for use as the primary place of residence at the time the individual assumes liability under the agreement of purchase and sale,
• The purchase price for the residential complex or unit is less than $450,000 before tax,
• The particular individual has paid all of the tax under Division II payable in respect of the supply of the complex or unit,
• Ownership of the complex or unit is transferred to the particular individual after the construction or substantial renovation thereof is substantially completed,
• After the construction or substantial renovation is substantially completed and before possession of the complex or unit is given to the particular individual, it was not occupied by anyone other than the individual of a relation of an individual,
• The first individual to occupy the complex or unit must be the particular individual or a relation of the particular individual.

In summary, the purchase must meet the following conditions to be eligible for the new housing rebate:

1. He or she intended to use the property as either his primary residence or the primary residence of a relation of that individual at the time of purchase,
2. No one can reside in the property between when the property is substantially completed and when the particular individual possesses the property, and
3. The first individual to occupy the property must be the particular individual or a relation of that individual.

How to determine the primary place of residence

An individual may have multiple residences and the GST/HST Policy Statement P-228 sets out the intention test to determine an individual’s primary place of residence. In essence, an individual must demonstrate he or she had the intention to use the property as the primary place of residence. The intention doesn’t need to be the primary intention to use the property as a primary place of residence. For example, an individual may purchase a property for the primary reason of resale but also intend to occupy it as a primary residence, and this would also satisfy the intention test.

An intervening event that frustrated an individual’s intention to occupy doesn’t disqualify the person from claiming the rebate

Case law indicates that when there’s an intervening event that frustrated an individual’s ability to utilize the property as his primary place of residence.

In Boucher v The Queen, the taxpayer initially lived in Montreal but had a house built in Val-Bélair. Unfortunately, the taxpayer’s wife was not able to find a job in Val-Bélair after they moved to Val-Belair, but she managed to find one in Montreal. Therefore, the taxpayer and his wife sold the new house and moved back to Montreal. The court found that although the taxpayer and his wife only lived in the new property for four months, it was only the circumstances surrounding the new job obtained by his wife that forced them to move back to Montreal. Therefore, they still qualified for the new housing rebate.

In Gagné v The Queen, the taxpayer initially lived in Montreal but acquired a property in Rivière-Rouge with the intention of finding new employment. However, the taxpayer’s wife started having health issues prior to the move and required treatment from specialists. As a result, they didn’t move to the new property until three years after it was substantially completed. Although the taxpayer’s wife never changed her mailing address or telephone number to the new property, the court found that she noted in her housing loan application for the new property that it was her principal residence, therefore she did have the intention to use it as her primary place of residence. The fact that they postponed three years should not disqualify them from claiming the rebate.

Pro tax tips – intention must be demonstrated by evidence

The intention of an individual to use a property as his or her primary place of residence must be demonstrated by evidence such as a change of mailing address or telephone number, the amount of time spent at each residence and the suitability of the property for use by the individual, especially there are multiple residences. It is generally recommended to consult with an experienced tax law firm to evaluate the strength of your case, especially when there’s an intervening event that forced the individual to change the initial plan.

FAQ

What are the requirements to claim the new housing rebate?

From the purchaser’s standpoint, the requirements are:

1. He or she intended to use the property as either his primary residence or the primary residence of a relation of that individual at the time of purchase,
2. No one can reside in the property between when the property is substantially completed and when the particular individual possesses the property, and
3. The first individual to occupy the property must be the particular individual or a relation of that individual.

How would the CRA determine an individual’s primary place of residence when there are multiple residences?

The CRA will generally review the following factors:

• the amount of time spent at any one of the residences;
• the location of the individual or qualifying relatives place of work;
• the availability of amenities particular to the personal needs of the individual (or qualifying relative); and
• the suitability of the property for use by the individual (or qualifying relative).

About the Author

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David J. Rotfleisch

David J. Rotfleisch, a leading Canadian tax lawyer, is not only a certified specialist in taxation but also a chartered professional accountant. Most recently, David is a pioneer in Canadian crypto taxation.

As of April 2020, he was one of 12 Ontario Certified Specialists In Taxation™.

Learn more about David J. Rotfleisch