HST on the Sale of a Home in Ontario: New Builds vs Resale

For most Ontario homeowners, selling a house is simple from a tax perspective: no HST and no GST. But that comfortable assumption breaks down the moment a property is newly built, substantially renovated, or sold on assignment. Getting the HST question wrong — in either direction — can cost tens of thousands of dollars.

This article lays out the general rules that apply to HST on home sale in Ontario, covering resale exemptions, new construction obligations, the federal new housing rebate, assignment sales, and the CRA audit risks that catch investors off guard.

As of writing, the combined federal GST and Ontario provincial component of HST total 13%. Verify current rates with CRA or a tax professional before closing.

The General Rule: Resale Homes Are Exempt

When an individual sells a used residential property — a house, condo, or cottage they previously lived in or that was lived in by a prior owner — the sale is generally exempt from HST under the Excise Tax Act. Neither the seller pays HST nor the buyer owes it.

This exemption covers most sales of previously occupied homes. If you bought a 1990s bungalow, lived in it, and are now selling it, HST is almost certainly not your concern. The exemption also applies to investment properties that have been rented to tenants for genuine residential use.

The situation changes significantly in the four scenarios described below.

When HST Does Apply to a Home Sale

1. New Construction

A builder selling a newly constructed home or condominium generally must charge HST on the purchase price. Under the Excise Tax Act, a "builder" is not limited to large developers — it includes any individual who builds or substantially renovates a property primarily for sale, not for their own use.

The full HST on a new home can be substantial. However, purchasers of qualifying new homes may be eligible for the GST/HST New Housing Rebate (discussed below), which recovers a portion of the tax paid.

Builders typically build the rebate into the transaction structure: if the buyer qualifies, the buyer assigns the rebate to the builder at closing and the builder reduces the price accordingly. If the buyer does not qualify (for example, because they are purchasing as an investment rental rather than a primary residence), the full HST applies and the buyer cannot assign the rebate — a fact that is sometimes buried in the fine print of pre-construction contracts.

2. Substantially Renovated Homes

A property that has been substantially renovated is treated like a new home for HST purposes. The Excise Tax Act defines "substantial renovation" as the removal or replacement of all or substantially all of the interior of a building (generally 90% or more, though the exact standard is technical — verify with a tax professional).

An individual who buys a rundown house, guts it entirely, and sells it will likely be treated as a builder selling new construction. This catches house-flippers by surprise. If you are renovating to sell, get tax advice before you list.

3. Commercial-to-Residential Conversions

Converting a commercial property — an old warehouse, a retail unit, an office — into residential units creates a new supply of housing and triggers HST obligations. The person making the conversion and selling the resulting units is treated as a builder and must charge HST accordingly.

4. Sellers Who Change the Use of the Property

This can be an HST trap for individual homeowners. If you:

• Build or buy a home intending to use it as your primary residence (HST-exempt on eventual sale), but
• Rent it out before you move in, or move out and rent it for an extended period before selling

...the sale is generally still exempt, unless you are a builder of the home, claimed input tax credits for it, or rented it out almost entirely for stays of less than 60 days. Rental use can change the result only in those cases.

The rules are nuanced and depend on timing, duration of rental, and whether you ever actually used the property as your primary residence. Do not assume you are in the clear without confirming with a tax professional.

The GST/HST New Housing Rebate

To soften the impact of HST on new homes, the federal government (and Ontario, through a parallel provincial component) offers a new housing rebate. As of writing, the rebate is available to purchasers of new homes up to a certain price threshold and recovers a portion of the HST paid. The rebate phases out above that threshold.

Key conditions:

• The buyer or a qualifying relation must use the home as a primary place of residence
• The application must be filed within the required limitation period after closing
• If the rebate is assigned to the builder at closing, the builder claims it — the buyer has already received the benefit through a reduced price

Investors purchasing pre-construction condos to rent out are generally not eligible for the rebate. Builders selling to investors may still present a purchase price that assumes a rebate — buyers should read their agreements carefully and seek advice if they are not certain whether they qualify.

HST on Assignment Sales

An assignment sale occurs when the original buyer of a pre-construction unit sells their rights under the Agreement of Purchase and Sale to a new buyer before the unit is built and registered.

Since May 7, 2022, every assignment of an agreement to buy a new home or condo, by anyone other than the builder, is taxable, and HST applies to the price paid for the assignment, less only any part the agreement shows in writing as reimbursing the deposit.

If you are selling a pre-construction assignment:

• Since May 7, 2022, HST applies to the assignment whether the property was purchased for personal use or as an investment
• The buyer of the assignment may also face HST obligations

Get independent tax advice before completing an assignment transaction. This is not an area to navigate without professional guidance.

Practical Steps to Avoid Surprises

1. Identify the property type early: Is this a resale home, new construction, substantially renovated, or an assignment? The answer determines your starting HST position.
2. Review your Agreement of Purchase and Sale carefully: New construction agreements often contain rebate assignment clauses. Understand what you are agreeing to.
3. Track your rental history: If you rented the property at any point, document when and for how long. This is the evidence you will need if CRA ever questions your exempt-sale position.
4. Consult a tax professional before closing: HST on a sale is a tax question that may also need advice from an accountant.

Frequently asked questions