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What is the actual purchase price of a new condo without HST, if price is $400,000 including HST? The condo is in Mississauga, Ontario and the buyer is not a first time home buyer.

  • Isn't this just 400000 / 1.13, assuming HST is 13%? – ChrisInEdmonton Apr 24 '12 at 18:34
  • 353, 982.30. 400k/1.13. x*1.13 = 400k. I don't think this is a finance related question. – Swati Apr 24 '12 at 18:42
  • What is your definition of purchase price? The question is meaningless unless the details of the closing statement are looked at in the light of Canadian law. The bottom line ($400,000?) to the buyer might include all kinds of closing costs, bank fees, etc which the law might regard as personal expenses that do not add to the basis of the house. Is just taking the tax off all that is needed? – Dilip Sarwate Apr 24 '12 at 18:50
  • IIRC, there is some form of rebate on newly constructed residential housing -- and only up to a certain cap -- hence why the answer isn't likely to just simply 400K/1.13. – Chris W. Rea Apr 24 '12 at 20:26
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Coincidentally, I read about this a week after the OP's question, in a Toronto Star article from the April 30, 2012 newspaper. The article is "Make sure you know the HST rules if you buy, or it could be costly" by Mark Weisleder. I couldn't find the exact article online (though it might be found here in the future), so I quote the following excerpt from my copy:

"When you buy a new home or condominium, there are rebates for the federal 5-per-cent portion of the HST and in Ontario, the provincial 8-per-cent portion.

You can qualify for a rebate of 36 per cent of the federal portion of the HST if the home costs $350,000 or less. If the home costs between $350,000 and $450,000 there is a sliding scale. At $450,000 the rebate ends.

For the provincial portion, everyone can apply for up to 75 per cent of the HST paid, to a maximum of $24,000. You can also apply for the rebates if you build your own home as well. It can add up to a sizeable sum. If a new home costs $300,000 and there was no rebate, the HST would be 13 per cent of the price, or $39,000. With the rebates, you'd pay $15,600 for a savings of $23,400.

The catch is that in order to qualify, the new home or condo has to be your primary residence, or you must prove that you have rented it out for at least a year. If you move in on closing, the builder often builds the rebate into the sale price and then applies to the Canada Revenue Agency for the refund on your behalf. Before the builder will do that, you have to sign a document saying that you will move in. [...]"   [emphasis above is mine]

And so, because the builder often includes the HST rebate in the sale price (and assuming your $400K was quoted on the same basis), then it isn't just a matter of calculating $400,000/1.13 ... that would understate the sale price without HST because part of the HST is being rebated. Rather, one needs to take the rebates into account.

The provincial part of the rebate is clear in the above article, but to determine the precise federal phase-out rules for the $350,000-$450,000 range, I found this worksheet PDF from Canada Revenue Agency, which has an example of calculating the federal rebate for homes in phase-out range: $6300 * ($450,000 - purchase_price)/$100,000 (Edit: I previously linked to an older PDF that had $8750 as the maximum, but that was a few years too old, when the federal portion of HST was higher than the current 5%.)

After playing trial & error with numbers in a spreadsheet, I arrived at the following:

     Original purchase price:      378,067.08
     Ontario part of HST (8%):      30,245.37 
     Ontario part of HST rebate:   (22,684.03)
     Federal part of HST (5%):      18,903.35
     Federal part of HST rebate:    (4,531.77)
                                  ===========
     Total:                        400,000.00

So, assuming the HST less rebates are both baked into a $400,000 new Ontario condo sale price, then the price without HST is likely $378,067.08. ... Of course, you could've just asked the builder. :-)

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