Enhanced GST Rebate on New Purpose Built Rental Properties

Memo | Taxation News – September 2023

On September 14, 2023 the Department of Finance announced an enhanced GST New Residential Rental Property rebate for new residential rental construction. With the intent to incentivize builders to build more rental housing, the Department of Finance is proposing to increase the GST Rental Rebate from 36 percent to 100 percent.

Background on GST New Residential Rental Property Rebate

In Canada, either the landlord pays GST on the purchase of a new residential rental property, or if self-constructed by the landlord, the landlord incurs a “self-supply”. On a self-supply the landlord must self-assess and pay GST on the fair market value of the property. Previously, a rebate equal to 36% of the GST paid on the purchase or self-supply was available to landlords.

However, the legislation contains thresholds where the rebate is ground down if the fair market value of the unit is between $350,000 and $450,000. If the value of the unit is above $450,000 no rebate is available. These thresholds have not changed since they were introduced in 2001.

Proposed Changes to the GST New Residential Rental Property Rebate

The following is a summary of the expected changes to the GST New Residential Rental Property Rebate:

Currently, the enhanced GST rebate is only in respect of the 5% GST and not the provincial portion of the HST in Ontario and Atlantic provinces. The draft legislation released does not provide further details on what “begins construction” means in the context of the enhanced rebate. Along with whether Ontario and the Atlantic provinces will extend the enhancements to the provincial portion of the HST.

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