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, no GST, and no government agency asking where the money went. But that comfortable assumption breaks down the moment a property is newly built, substantially renovated, sold on assignment, or used as a rental before closing. 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 the vast majority of Ontario real estate transactions. 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 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 builder assigns the rebate to themselves at closing and 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 most 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 is one of the most common HST traps 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 CRA may treat your sale as a taxable supply on the basis that the property was used for commercial activity (rental income). The exemption for resale homes hinges on the property being used for residential purposes. Rental use can change that characterization.

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.

As of writing, the CRA has taken the position that most assignment sales are subject to HST on the profit (the difference between the original purchase price and the assignment price). This has been an area of significant CRA enforcement activity. Sellers who believed their assignment profit was HST-free have faced assessments and penalties.

If you are selling a pre-construction assignment:

• The HST implications depend on whether you are considered a builder and whether the property was purchased for personal use or as an investment
• The buyer of the assignment may also face HST obligations
• CRA audit activity in this area has increased substantially in recent years

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: Real estate lawyers handle the conveyancing — but HST on a sale is a tax question that may require advice from an accountant or tax lawyer.

Frequently asked questions