But it’s hard to avoid GST on property purchase



Despite the looming Toronto land transfer tax, you may be eligible to save a few more bills than you thought, our writer says.


Q: Last week, my brother and I completed the purchase of a small building in south Etobicoke. It consists of two stores on the main floor and a two-bedroom apartment on the second floor. The building cost approximately $650,000. Are we exempt from GST and will we qualify for land transfer tax rebates?

A: Months of unsuccessful lobbying by homeowners, investors, special interest groups to quash Toronto’s LTT came to a climax on Oct. 22. We have a new tax in town and it isn’t cheap. What will be the economic impact to our city, and will Toronto continue to attract investors and homebuyers? It hasn’t dampened real estate mogul Donald Trump. The Donald glanced into his crystal ball and continues to build his new 68-storey condo and hotel in the financial district of our fair city. Everyone knows that no one argues with The Donald (unless your name is Rosie). Investors should be prepared to fork over more than half of the $155-million LTT the city expects to collect.

There are many unknowns as to the implementation and some of the rules surrounding Mr. Miller’s new Toronto LTT. Within the next several weeks, more information should become available. Check with your real estate lawyer, they would be one of the primary sources with regards to the administration of the Toronto LTT.

There are at least the following issues that need to be addressed in your particular situation:

  1. GST on property.

  2. Are you a GST registrant?

  3. Toronto land transfer tax.

  4. Ontario land transfer tax.

GST generally applies to real property with very few exceptions, such as resale homes, farmland (special circumstances), or a lease on a residential complex to an individual for a continuous period of at least one month.

Commercial property is subject to GST. The residential portion of building maybe exempt. If you are a GST registrant, amount owing can be reported on the next GST filing period.

Purchases with a signed purchase and sale agreement before Dec. 31 are exempt from Toronto LTT. However, Ontario LTT will apply. Rebates of Ontario LTT are restricted to “first-time buyers of newly constructed residential homes.”

Effective Feb. 1, 2008, the Toronto LTT on commercial property will be as follows:

  • Value of consideration up to $55,000: 0.5 per cent.

  • Excess of $55,000 to $400,000: 1 per cent.

  • Excess of $400,000 to $40 million (includes multi-residential units): 1.5 per cent.

  • $40 million-plus: 1 per cent.

Henry Choo Chong, CGA provides professional accounting and taxation solutions for individuals, businesses and corporations. Henry can be reached at 416-590-1728, ext. 304. E-mail questions to: choochonghcga@yahoo.ca