After April 1? HST Transition Primer for Home Buyers & Sellers
Glen Korstrom
Other
Most BC residents will reap no tax savings if they postpone buying a home until the provincial government officially eliminates the harmonized sales tax and reinstitutes a provincial sales tax (PST) on April 1.
Homebuilders are hammering away at this message in an attempt to eliminate confusion among consumers, who wrongly believe that they will save tax if they wait to buy a new home.
“Builders are frustrated with the confusion in the public,” said Bob De Wit, who is CEO of the Greater Vancouver Home Builders’ Association. “It’s a complicated issue.”
The PST transition will make the purchase of pricier homes cheaper. Cost savings on the purchases of new homes after the PST is re-instated April 1 will be limited to those priced above $850,000, said Mackay LLP director of income and commodity taxation Tom Baybutt. New homes are currently taxed the equivalent of 7 per cent – not the full 12 per cent HST – on the first $850,000. Every dollar above that threshold is taxed at 12 per cent.
After April 1, buyers of new homes will have to pay the 5 per cent goods and services tax (GST) and a 2 per cent transitional tax on the cost of their home regardless of how expensive it is. But the transitional tax kicks in only if the home’s construction is at least per cent complete. Builders of those homes are then reimbursed for the per cent PST that they will have to spend on the building materials that go into the homes.
Pre-sales and other homes that are at least per cent built after April 1 will not be subject to the transitional tax, and builders will not be eligible to apply for rebates on the per cent PST that they spend on building materials for those homes.
The 2 per cent transitional tax will be phased out on March 31, 2015.
Real estate agents’ fees for home sellers will also be lower under provincial sales tax regime. Baybutt pointed out that, after April 1, real estate commissions, which are subject to per cent HST, will be subject only to per cent GST.
The tax on legal fees, however, will not drop after April 1 because they are subject to the new PST. Condominium fees, such as move-in fees, are not taxable under either the HST or the future GST-PST system.
© 2013 Real Estate Weekly