* Comes into effect July 1, 2010*
Interesting Article below.
This is worth knowing, as it could effect closing costs for some clients, as they will look to us, for advice.
http://www.thestar.com/article/656164 <http://www.thestar.com/article/656164> I have attached the link, as it is well worth sharing .
Lobbying nets 'major' changes to HST on new home purchases
Full HST will be charged only on the amount of price over $400,000, not entire purchase price
Jun 27, 2009 04:30 AM
Tracy Hanes
Toronto Star
Changes to how the harmonized sales tax will be charged on new homes priced over $400,000 will help protect affordability, according to two major Ontario homebuilders' groups.
Last week, the provincial government agreed to move to a progressive tax structure when the HST comes into effect July 1, 2010, significantly reducing the tax homebuyers will have to pay on new houses above that threshold.
Under the original plan, homes priced below $400,000 would have qualified for a 75 per cent rebate of the provincial portion of the new tax (which combines provincial sales tax and the goods and services tax), ensuring that there would have been been no more taxes charged on new houses than there are currently (about 2 per cent).
However, the rebate would have been scaled after $400,000 and would not have applied at all to homes priced at $500,000 or more, which would have added $30,000 in new taxes to half-million dollar houses.
But after vigorous lobbying from the Building Industry and Land Development Association and the Ontario Home Builders' Association, the province has agreed to charge the HST only on the amount of the purchase price over $400,000 and not the entire purchase price.
"This is a much-needed win for builders and homebuyers," said BILD president and CEO Stephen Dupuis. "This is a major amendment."
"It was the right move for the government to make," said Ontario Home Builders' Association president Frank Giannone. "And the lower middle class, who we were worried about, will be protected."
Builders said the problem with the $400,000 threshold is that the market would get skewed around that number and it was also too low a threshold for the Greater Toronto Area, where nearly half of all new homes and condos cost more than that.
Under the original plan, there would have been $30,000 more in provincial taxes added to a $500,000 house; that now will decline to $6,000 (net of input tax credits). Tax payable escalated from $8,000 on a $400,000 home up to $40,000 on a $500,000 home, excluding input tax credits.
"The $6,000 figure is much more reasonable," said Giannone.
He pointed out that a home is often a person's biggest investment and through home ownership, they build a nest egg, which will help fund their retirement, thus lessening the burden on government.
"The provincial government's decision to move to a progressive tax structure . . . is enlightened and responsive," said Dupuis. "The progressive tax structure dramatically reduces the quantum of the tax increase."
Dupuis said while BILD does not oppose harmonization – "it's a good economic and tax policy, which provides business tax relief and eliminates tax on tax pyramiding" and should ultimately offer some cost breaks to builders on things such as building materials – BILD has maintained from the first that housing is different from other consumer products.
The homebuilders' groups still have some issues they will continue to press for reform. One is the HST and renovations, as the new tax is likely to create a flourishing underground economy for handymen operating on a cash basis.
BILD and the OHBA are also asking the federal government to follow the province's lead and move to a progressive GST tax structure in Ontario, as the old system, which has been in place for 10 years, is outdated and does not encourage affordability. The GST will add $25,000 in taxes to a $500,000 home.
