On September 14, 2023 the federal government announced changes to the existing GST (or the 5% federal portion of the HST) residential rental property rebate. These changes are to encourage builders to create more supply of affordable housing across Canada. The enhanced rebate will increase to 100% for builders that commence construction of new purpose-built multi-family homes on or after September 14, 2023, and before December 31, 2030.  The changes also eliminate the rebate cap for qualifying residential rental units valued greater than $450,000.

To qualify for the rebate, certain conditions will apply:

  • The new construction must be completed no later than December 31, 2035;
  • New residential units must be contained in a building with at least four private apartments (fully functional kitchen, bath and living area) or at least ten private rooms or suites (i.e., units with no kitchen or separate bath, etc.); and
  • and the building must contain at least 90% long-term rental units.

Therefore, if more than 10% of the building’s units are utilized in short-term rentals (e.g., AirBnB’s), the enhanced rebate won’t apply. It is not clear how the Canada Revenue Agency (“CRA”) will police this or ensure these conditions are or will be met at the time of paying out the rebate. We assume that each builder applying for the rebate will need to declare that they (or any subsequent owners and operators of the building) will comply with the 90% threshold of long-term rental units.

Individually owned properties

The 100% rebate will not apply to individually owned condominiums (i.e., individual speculators) single family homes, duplexes, triplexes, housing co-ops and houses situated on leased land or sites in residential trailer parks. However, these property types will still qualify for the existing rebate of up to 36% of the GST paid.

Renovations

The enhanced 100% rebate will not apply for large renovations (I.e., defined as “substantial”) of existing residential properties. However, the existing rebate will still apply for substantially renovated properties.

Office & non-residential to residential conversions

Conversions of existing non-residential properties (i.e., office buildings into long-term residential rentals) will generally apply for the enhanced 100% rebate provided all the other conditions for the rebate are met.

It is important to note that, as of the time of writing the draft legislation was not available and so the details in this announcement may change. The new rules will be finalized and become law once the legislation is passed with Royal Assent, hopefully later this fall. When the legislation is released we will provide further comments so stay tuned for further information.

At Achen Henderson CPAs, we help you to take the complexity out of sales taxes for builders and the construction sector. We are excited to learn about your business and how we can help. Call us today for help getting your sales tax collection and reporting right, so that you can rest easy by ensuring your business is not offside with these indirect tax rules across Canada.

A link to Finance Canada’s Backgrounder can be found here: Enhanced GST Rental Rebate to build more apartments for renters – Canada.ca.  You may also be interested in our article that covers the existing rules for builder-landlords, which can be found here:  GST/HST for Builder-landlords.