Ocean Mist

Posted by Tax Consultants

PST Housing Transition

On February 17th, 2012 the Government announced the transitional rules for returning to the PST. It is important to note that the HST does not apply to resale housing.

The housing transition rules are for people buy a newly constructed home/condos or prepaids under the PST, whether built entirely under the HST, entirely under the PST, or partly under HST and partly under the PST, they will all pay a consistent and equitable amount of tax, under the new transition rules.

  • B.C.’s portion of the HST will no longer apply to newly built homes where construction begins on or after April 1, 2013. Builders will once again pay seven per cent PST on their building materials. On average, about two per cent of the home’s final price will again be embedded PST.

 

  • The temporary housing transition measures will be in place for two years, until March 31, 2015. The tax only applies to homes where construction begins before the transition date and ownership and possession occur after.

 

  • The temporary housing transition tax and the temporary      housing transition rebates will be administered by the Canada Revenue Agency      on behalf of B.C. The Province is administering the grant for new      secondary vacation and recreational homes.

For newly built homes where construction begins before April 1, 2013, but ownership and possession occur after, purchasers will not pay the seven per cent provincial portion of the HST. Instead, purchasers will pay a temporary, transitional provincial tax of two per cent on the full house price.

Builders will receive temporary housing transition rebates to offset PST on materials to help prevent double-taxation on homebuyers.

  • Average amount of embedded sales tax in newly built homes under PST: two per cent.
  • Tax paid by purchasers on an $850,000-newly built home after HST rebate: two per cent.
  • Tax rate on a newly built home during transition: two per cent.

 

The B.C. new housing rebate threshold will be increased to $850,000, meaning more than 90 per cent of newly built homes will now be eligible for a provincial HST rebate of up to $42,500.

Raising the B.C. HST rebate threshold to $850,000 is expected to save purchasers about $60 million in 2012-13.

The maximum value rises to $42,500 from $26,250, a 60 per cent increase.