Important updates on the GST/HST first time new homebuyer rebate

If you’re a builder or a new homebuyer, you may be left wondering how the new GST/HST rebate is supposed to work, given the draft legislation has not been finalized, and the Canada Revenue Agency (CRA) has not yet provided any forms to claim or assign the rebate from the new homebuyer to the builder. This article aims to give you some clarity on these issues based on some interim guidance provided for builders by the CRA’s GST/HST Rulings Directorate and a recently updated CRA web-page regarding this issue.

What are builders and buyers to do for now?

The GST/HST new homebuyer’s rebate won’t come into effect until the legislation is passed, and it’s likely that it will be further refined before it is passed. In the interim, builders are being advised to allow the new homebuyer to credit their existing GST (HST where applicable) new home rebate entitlement to the builder. Meaning, up to 36% (based on the existing purchase price thresholds of $350K and $450K) of the GST payable on the new home, can be rebated indirectly to the buyer via CRA, and the buyer can then credit that rebate back to the builder. This is how the existing rules work, and which have been in place since the advent of the existing rebate.

However, the balance of the rebate (i.e., up to the remaining 64%) must then be applied for directly with CRA by the new homebuyer(s) once the legislation is passed and there is a new or updated rebate form available. Of course, the remaining rebate will be limited to the maximum new home purchase price of $1.5M, after which the new rebate drops to NIL.

Although this is not ideal, we understand that this is the best “stop-gap” measure that CRA can provide in the interim, because, as is typical of many tax policy’s announced by our federal government, they have yet to provide the tools (i.e. the legislation) that the CRA needs to properly understand and administer their announced program.

Another problem with this stop-gap measure, is that most new homes sold in Canada today exceed the $350K threshold for the existing new home rebate, whereby the eligible amount is gradually reduced between that floor amount and $450K. Purchase prices (excl. GST/HST) above $450K, reduce the rebate to NIL, for otherwise eligible new home buyers.

A couple in Vancouver that purchases a new home as their primary place of residence and with a purchase price of $800K for example, would not receive the existing new home rebate and would need to apply directly to the CRA for the 100% rebate of the GST, once the legislation is passed and the new form(s) are available. CRA’s new guidance is quite explicit, insofar as it states that builders cannot credit the new first time homebuyer rebate to otherwise eligible purchases, until the legislation is passed.

Our takeaways on this predicament

Unfortunately, this temporary measure will most likely frustrate many arrangements with lenders and may not be “work-able” in practice. For builders, following this guidance removes a substantial amount of financial risk if they were to instead, attempt to take the approach of having the new homebuyer assign the full 100% rebate (based on the maximum home value of $1.5M) now and “hope for the best”, but it will also frustrate new home sales transactions and disenchant new homebuyers.

The CRA’s stop-gap measure of the builder and new homebuyer agreeing to credit the existing rebate back to the builder on homes valued up to $450K (i.e., the existing rules), will also not help matters much, given that very few new homes sold today in most major markets, have purchase prices exceeding that threshold. Therefore, new homebuyers will simply have to pay (and somehow finance) the GST on their new home and then wait to claim it with CRA, if and once the legislation is passed and the new form(s) becomes available.

The situation is fluid and there’s no telling when the legislation will be passed in the next few months, but it is expected to be passed “this fall”, which is government-speak for “sometime before Christmas”. In the meantime, stay tuned to our blogs for updates on this important and troublesome issue.

Despite the intended effective date of May 27, 2025, and as with many other tax ‘goodies’ announced by the federal government during an election cycle, this one has yielded the intended result yet, leaving new homebuyers and builders in limbo. We’re hopeful that the government prioritizes the passage of the relevant legislation, which could come as early as this November when the 2025 budget is finally tabled.

Simple stuff right? At Achen Henderson, we have a team of Canadian indirect and international tax specialists as well as customs and trade professionals to help your business navigate the indirect and international tax changes and challenges wherever you do business in Canada or the US.