Grandparented homes may have the advantage of not being subject to HST, but builders may incurr a transitional tax adjustment.
Residential homes where ownership and possession pass after June 30, 2010 will generally be subject to HST. There is a grandparenting exception for homes where there was a written agreement of purchase and sale was before June 18, 2009. The Ontario HST new home credit is not available on these homes since HST is not charged. Also, the RST transitional rebate is not available since the home falls under the RST rules.
Where a home is grandparented and the construction is not substantially complete (90%) at July 1, 2010, the builder must pay a transitional tax adjustment which is intended to approximate the amount of RST that would have been paid had the construction cost been incurred prior to July 1st.
The transitional tax is 2% of the total purchase price of the home and is prorated based on the extent of completion at July 1, 2010.
- 100% of the tax is applicable for a home less then 10% complete;
- 75% for 10%-25% completion;
- 50% for 25%-50% complete;
- 25% for 50%-75% complete and
- 10% for 75%-90% complete.
The Ontario portion of the HST paid on supplies purchased after July 1, 2010 to complete construction would be available for an HST input tax credit.
