On Canada Day, the one-per-cent GST drop took effect but fireworks companies were not exactly expecting a spike in sales for people celebrating their newfound increase in disposable income.
However, for those planning a major purchase, like closing on a new house or condo, the reduction may be something worth celebrating.
If you took ownership or possession of your newly built house or condo after July 1, 2006, you will have a little more disposable income in your pocket. Theoretically, a one-per-cent drop in the GST amounts to $3,000 on a $300,000 new-home purchase.
How you realize the savings, on the other hand, depends on when you were working on the deal.
If you entered into a purchase agreement prior to Canada Day, you have to apply to the Canada Revenue Agency for a one-per-cent Transitional Credit off your seven-per-cent GST charge. Essentially, you have to apply for a rebate through the federal government.
If you agree to buy a new home after July 1 and later take ownership and possession of it, the six-per-cent GST rate applies and you realize the savings on your purchase price.
In effect, if you are now in an agreement to take ownership and possession of a new home after July 1, you face the same GST charge as someone who signs their agreement after July 1 — but you’ll have to do a little legwork to get your money.
Our GST calculation is a generalization and does not take into account all available incentives and rebates.
Harley Mintz, FCA, CFP, TEP, CPA is the Chair of Mintz & Partners and a member of the firm’s Tax Group and RENT (Real Estate Niche Team). Harley can be reached at 416-644-4325 or firstname.lastname@example.org.