Mixed-Use Property and the GST/HST New Housing Rebate in Canada

You may be buying a new home that includes a home office, a storefront, a studio or some other space used for business. You want to know whether the GST/HST new housing rebate still applies and whether it gets cut back because part of the property is not a home.

The rebate is written around residential use. That makes the layout of the property, who owns it and how you plan to use it important. This article sets out the conditions that always apply so you can ask the right questions.

This article covers Canadian federal tax law, which applies in every province.

Why mixed use raises a question

The base rebate applies where a builder sells a new single unit residential complex or a residential condominium unit to an individual who acquires it as their own or a relation's primary place of residence. The rebate is aimed at housing, not at business premises.

A mixed-use property is one that combines living space with space used for something else. Whether your property still counts as a single unit residential complex, and how any non-residential part is treated, turns on its design, how it is sold and how it is used. Those are fact-specific questions, so do not assume the answer from the sales brochure.

The conditions the rebate starts from

• The buyer is an individual who has paid all applicable tax, and ownership transfers after substantial completion.
• Total consideration is under $450,000.
• The first individual to occupy the home as a residence is the buyer or a relation, unless the buyer makes an exempt sale before anyone occupies it.
• Only individuals can claim, and partnerships and corporations cannot.

Relations include blood relatives, spouses, common-law partners and adoptive relations, and for this rebate former spouses and former common-law partners also count.

Home office, studio or shop: what matters

The intent to use the house as your or a relation's primary place of residence must be evident at the outset of buying, building or substantially renovating. A recreational cottage or an investment property does not qualify. If the main purpose of the purchase is the business space, that intent test is where problems are likely to appear.

Ownership structure also matters. An individual cannot claim if a partnership or corporation co-owns the house. If a business entity will hold title to a property with a commercial component, the owner rebate may be unavailable.

A corporation that buys a new residential unit to rent out is not shut out of all relief. A corporation that is a purchaser and landlord can claim the new residential rental property rebate on Form GST524 if the purchase was taxable and it is not the builder. That rebate is for units leased or held for lease as residences, and it is not paid where the individual qualifies for the new housing rebate on the same housing.

How the price affects the amount

Where total consideration is $350,000 or less, the rebate is the lesser of $6,300 and 36% of the GST or federal part of HST paid. Between $350,000 and $450,000 it phases out, and at $450,000 or more the base rebate is nil.

For a house bought from a builder, those thresholds are tested against total consideration, which is the purchase price excluding GST/HST and certain other amounts. How the contract allocates price between living and non-living space may therefore matter, so ask your lawyer how the purchase agreement is set out.

For a new home with total consideration of $1,000,000 or less, the first-time home buyers' rebate is the lesser of $50,000 and the tax paid, minus any base rebate. It has its own eligibility tests.

What to do next

• Ask the builder how the unit is described in the purchase agreement and the statement of adjustments.
• Decide, and be able to show, that the home is a primary place of residence for you or a relation.
• Confirm who will be on title, since a corporation or partnership as co-owner can block an individual's claim.
• Have a lawyer or accountant confirm how any commercial space affects the rebate before you close.
• Keep your records, including the worksheet and supporting documents, for six years.

Frequently asked questions