Last year, the Department of Finance announced a new enhanced GST rental property rebate for purpose-built rental properties such as apartment buildings, student housing, and seniors’ residences.
To qualify, new multiple-unit residential complexes must have four or more self-contained apartments (with private kitchens, bathrooms, and living areas) or 10 or more private rooms or suites, where all or substantially all the units in the complex will be used for long-term residential rental accommodation.
Background
The GST new residential rental property rebate was introduced in 2000 as a parallel rebate to the GST new housing rebate. The rebate is based on the fair market value of each residential unit and is calculated as 36% of the GST or federal portion of the HST to a maximum of $6,300 per residential unit based on a unit with a fair market value of $350,000. The rebate is gradually phased out where units have a fair market value of more than $350,000 and is eliminated where units have a fair market value of $450,000 or more.
A rebate of the provincial component of Ontario HST was introduced when Ontario harmonized with the GST in 2010. The Ontario rebate is calculated as 75% of the provincial component of the HST to a maximum of $24,000 per unit with no phase-out. No rebate of the provincial component of the HST was available in the other participating provinces of Newfoundland and Labrador, Nova Scotia, Prince Edward Island, or New Brunswick.
Quebec currently provides a QST rebate of 36% of the QST payable on the acquisition or construction of a new residential rental complex in the province. The rebate is gradually phased out where units have a fair market value of more than $200,000 and is eliminated where units have a fair market value of $225,000 or more.
The enhanced rebate will apply where construction begins after Sept. 13, 2023 but before 2031 and is substantially completed before 2036. It will result in a rebate of 100% of the GST or federal portion of the HST, with no maximum.
Because the enhanced rebate is intended to stimulate supplies of new residential rental units, neither substantial renovations of existing residential complexes nor the construction of new residential complexes with fewer than four units (e.g., condominium units, single-unit housing, duplexes, triplexes, etc.) will qualify, although they may continue to qualify for the existing new rental property rebate.
The Department of Finance has since clarified that co-operative housing corporations that provide long-term rental accommodations (but not where occupants have an ownership or equity interest) would be eligible for the enhanced rebate.
In addition, because universities, public colleges, and school authorities are currently subject to different rules than other builders, it is proposed that those operating on a not-for-profit basis will be allowed to opt in to the GST/HST rules that apply to other builders. That, along with relaxed rebate conditions, will allow them to claim the enhanced rebate in respect of new student housing projects.
The federal government also encouraged its provincial counterparts to consider providing relief with respect to the provincial component of the HST. Four of the five participating provinces have announced rebate programs for the provincial component of the HST on new rental properties:
- Newfoundland and Labrador intends to introduce new residential rental property rebates as part of a five-point plan to increase the availability of affordable housing. Purpose-built rental properties will be eligible for a 100% rebate of the 10% provincial portion of the HST on qualifying properties. In addition, other purchased or owner-built residential rental properties that do not qualify for the enhanced rebate may be eligible for a 36% rebate of the provincial portion of the HST to a maximum of $12,600 per unit.
- Prince Edward Island intends to rebate 100% of the 10% provincial portion of the HST to a maximum rebate of $35,000 per unit where construction is started on or after Sept. 14, 2023 and the complex is completed before 2029. Projects completed after 2028 and before 2035 would qualify for a reduced rebate. The program would be harmonized with the federal process and would be reviewed after three years to evaluate its effectiveness.
- Nova Scotia has introduced legislation that will allow the CRA to rebate the 10% provincial portion of the HST on new purpose-built rental housing where construction begins on or after Sept. 14, 2023 and before 2031 and is substantially completed before 2036.
- Ontario intends to increase the current new residential rental property rebate to 100% of the 8% provincial portion of the HST on purpose-built rental housing where construction begins on or after Sept. 14, 2023 and before 2031 and is substantially completed before 2036. New rental properties that do not qualify for the enhanced rebate may continue to be eligible for the existing rebate of 75% of the provincial portion of the HST to a maximum of $24,000 per unit.
However, New Brunswick has not yet indicated whether it will introduce a rebate of the 10% provincial portion of the HST for rental properties in the province.
And Quebec has indicated that it does not intend to introduce an enhanced QST rebate of the QST applicable to new residential rental complexes. The existing QST rebate on the acquisition or construction of a new residential rental complex in the province of Quebec will continue to apply.
The information in this publication is current as of May 9, 2024.
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