Landlord's GST rebate for new residential rental properties

Proposed Amendments

Frédéric Pansieri
Article
| 9/27/2023

Updated November 1, 2023. 

Following the announcement made by the Federal Canadian government on September 14, 2023 to introduce legislation to remove the Goods and Services Tax (GST) on the construction of new apartment buildings for renters, Bill C-56 (An Act to amend the Excise Tax Act and the Competition Act) was issued on September 21, 2023. 

The draft legislation under Bill C-56 proposes changes to Section 256.2 of the Excise Tax Act to enhance the GST rental rebate on new-purpose-built rental housing, including apartment buildings, student housing, and senior residences built specifically for long-term rental accommodation.

Changes to the GST rental rebate scheme  

This enhancement would increase the GST rental rebate from 36 per cent to 100 per cent of the GST payable on the purchase or deemed purchase occurring on the construction of such property. It would also remove the existing GST rental rebate phase-out thresholds for purpose-built rental housing projects. Those thresholds currently limit the GST rental rebate to a maximum of $6,300 per unit when the unit is valued at $350,000 (i.e., 5 per cent x 36 per cent x $350,000) and gradually reduce the rental rebate when the unit is valued between $350,000 and $450,000.  No rebate for the GST is available when the unit is valued at $450,000 or more. The enhanced GST rebate would apply to projects that begin construction on or after September 14, 2023 and on or before December 31, 2030, and complete construction by December 31, 2035. 

For example: for a two-bedroom unit valued at $500,000, the enhanced rebate would deliver $25,000 in tax relief (i.e., 5 per cent of $500,000) while under the current rules, there would be no GST rental rebate available given that the unit is valued at more than $450,000. 

The backgrounder issued by the Department of Finance on September 14, 2023 provides the following useful information (which we expect will be included in regulations yet to be issued): 

Qualifying new residential units would be those that currently qualify for the existing GST rental rebate and are in buildings with at least:

  • Four private apartment units (i.e., a unit with a private kitchen, bathroom, and living areas), or at least 10 private rooms or suites (e.g., a 10-unit residence for students, seniors, or people with disabilities); and,
  • 90 per cent of residential units designated for long-term rental.

Projects that convert existing non-residential real estate, such as an office building, into a residential complex would be eligible for the enhanced GST rental rebate if all other above conditions are met. Public service bodies would also be eligible to access the enhanced GST rental rebate. 

The enhanced GST rental rebate will not apply to individually-owned condominium units, single-unit housing, duplexes, triplexes, housing co-ops, and owned houses situated on leased land and sites in residential trailer parks, but this housing would continue to qualify for the existing GST rental rebate where the conditions for the existing rebate are met. 

To protect Canadian renters from renovictions, the enhanced GST rental rebate will not apply to substantial renovations of existing residential complexes. This is intended to stimulate new supply, not take supply off the market.

UPDATE – November 1, 2023: The province of Ontario has announced on November 1, 2023 that the amendment to the rental rebate will also apply to the rebate currently available for the 8 per cent Ontario component of the HST, which is currently equal to 75 per cent of the provincial component subject to a maximum rebate of $24,000 per unit if the value of the unit is $400,000 or more. The proposed rebate for the Ontario portion of the HST will now be available under the same terms as for the GST portion of the rebate with no limit when the value of the unit is in excess of $400,000. As a result, both rebates will provide for a combined full relief of the 13 per cent HST otherwise payable.

This article has been prepared for the general information of our clients. Please note that this publication should not be considered a substitute for personalized advice related to your situation.

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Frederic Pansieri
Frédéric Pansieri
Partner, Commodity Tax
Frédéric Pansieri Professional Corporation