Is anyone else having trouble understanding how to calculate HST on a new construction house intended as new rental housing?
I’m working on a tenant first Rent-to-Own deal in Barrie (I know, it’s not Hamilton but they weren’t willing to commute from Hamilton to their jobs in Barrie, high paying jobs I might add) on a new construction house so I’m researching online how to calculate HST.
Calculating the HST itself is straightforward, take 13% (8% PST + 5% GST) of the purchase price of the property. Simple enough! Where things get less straight forward is the HST rebates. The “proposed” provincial new rental rebate would apply across all price ranges up to a maximum rebate of $24,000 whereas the federal GST rebate only applies to properties below $450,000 (remember, tenants want safe, secure homes, and not mansions)
How the provincial rebate is calculated is 75% of the 8% PST. Example: for a $100,000 house the HST at 13% is $13,000 which includes 8% or $8,000 of provincial sales tax (PST). The provincial rebate is 75% of the $8,000 for PST => rebate is 6,000
As for the GST portion, take 36% of the 5% GST. Continuing with the above example which includes GST at 5% or $5,000 at 36% => rebate is 1,800
For a total rebate of $7,800… almost 8% of the purchase price. Kind of like how things were pre HST…. hmmm. Maybe HST isn’t the devil everyone is making it out to be.
By the way, DISCLAIMER: I’m not an accountant so please speak to the accounting expert on your team. If you need one please let me know and I can refer you to a couple (email me at erwin (at) MrHamilton.ca)
Here are the links I used for research: http://www.rev.gov.on.ca/en/notices/hst/02.html, http://www.cra-arc.gc.ca/E/pub/gi/gi-079/README.html, http://www.cra-arc.gc.ca/E/pub/gm/b-087/b-087-e.pdf
Happy Investing Everyone!