The HST – what homebuyers need to know by Andrew Peck
On July 1, 2010, the BC government plans to combine the 7% provincial sales tax (PST) and the 5% per cent federal goods and services tax (GST) into one 12 per cent harmonized sales tax (HST).
The HST will cost you 7% more on most goods and service. A rule of thumb is, if you now pay the 5% GST on goods and services, you will pay the 12% HST on the same goods and services. This includes new homes.
Royal Pacific Realty opposes any tax measures which diminish affordable home ownership, as do about 85% of British Columbians who oppose the tax, according to a new Ipsos Reid poll.
What are we doing at Royal Pacific Realty to make sure home buyers concerns are heard before the tax is implemented?
We plan to actively participate in the Real Estate Board of Greater Vancouver’s campaign which includes writing letters to our elected representatives. In the coming weeks, sample letters for our clients will be available from Royal Pacific REALTORS® and here for you to sign and send to your MLA.
Pre-sales
If you plan to buy a presale home (a home that is not yet built), the BC Government has not yet released information about rules for pre-sales. When information is released, we will post it here.
The HST and new home buyers
Currently, when you buy a new home, you pay a 5% GST. If you qualify for a GST rebate you receive 36% of the GST paid on the first $350,000 of your new home price, and a partial rebate if your new home is priced $350,000 to $450,000.
When the HST is in force on July 1, 2010, you’ll pay a 12% HST on a new home. If your home is priced at $400,000 or less, you’ll receive a rebate of 5% to a maximum of $20,000.
If you buy a new home priced at more than $400,000 you will receive a flat rebate of $20,000.
Total Cost of an Actual New Home Sale/Purchase Transaction (July 2009) Purchase/Selling Price = $410,000
| |
Current Structure |
| Actual Purchase Price = $410,000 |
Cost |
GST @ 5% |
PST @7% |
Total |
| Buyer |
|
|
|
|
| Purchase Price plus taxes and rebates |
410,000 |
17,980 |
0 |
427,980 |
| Property Transfer Tax |
6,200 |
0 |
0 |
6,200 |
| Notary Fees (legal): |
500 |
25 |
35 |
560 |
| Non taxable disbursements |
240 |
0 |
0 |
240 |
| GST taxable disbursements |
70 |
4 |
0 |
74 |
| Home Inspection |
350 |
18 |
0 |
368 |
| Total Closing Costs |
417,360 |
18,027 |
35 |
435,422 |
| July 1, 2010 On |
|
| |
Cost (1) (2) |
HST @ 12% |
Total |
Additional Tax |
| Buyer |
|
|
|
|
| Purchase Price plus taxes and rebates |
401,960 |
25,209 |
427,169 |
(811) |
| Property Transfer Tax |
6,039 |
0 |
6,039 |
(161) |
| Notary Fees (legal): |
500 |
60 |
560 |
0 |
| Non taxable disbursements |
240 |
0 |
240 |
0 |
| GST taxable disbursements |
70 |
8 |
78 |
4 |
| Home Inspection |
350 |
42 |
392 |
24 |
| Total Closing Costs |
409,159 |
25,319 |
434,478 |
(944) |
(1) Selling price with embedded 2% PST removed
| |
Current Structure |
| Actual Selling Price = $410,000 |
Cost |
GST @ 5% |
PST @7% |
Total |
| Seller |
|
|
|
|
| Commision |
13,750 |
688 |
0 |
14,438 |
| Notary Fees (legal): |
500 |
25 |
35 |
560 |
| Non taxable disbursements |
240 |
0 |
0 |
240 |
| GST taxable disbursements |
70 |
4 |
0 |
74 |
| Discharge of builder’s mortgage |
200 |
0 |
0 |
200 |
| Total Closing Costs |
14,760 |
717 |
35 |
15,512 |
| July 1, 2010 On |
|
| |
Cost (2) |
HST @ 12% |
Total |
Additional Tax |
| Seller |
|
|
|
|
| Commision |
13,549 |
1,626 |
15,175 |
737 (2) |
| Notary Fees (legal): |
500 |
60 |
560 |
0 |
| Non taxable disbursements |
240 |
0 |
240 |
0 |
| GST taxable disbursements |
70 |
8 |
78 |
4 |
| Discharge of builder’s mortgage |
200 |
0 |
200 |
0 |
| Total Closing Costs |
14,559 |
1,694 |
16,253 |
741 |
(2) PST on overheads claimed as ITCs has not been considered in the price of commission and
other services
Illustrative Example - New Home Purchase/Sale Transaction Purchase/Selling Price = $600,000
| |
Current Structure |
| Actual Purchase Price = $600,000 |
Cost |
GST @ 5% |
PST @7% |
Total |
| Buyer |
|
|
|
|
| Purchase Price plus taxes and rebates |
600,000 |
30,000 |
0 |
630,000 |
| Property Transfer Tax |
10,000 |
0 |
0 |
10,000 |
| Notary Fees (legal): |
500 |
25 |
35 |
560 |
| Non taxable disbursements |
240 |
0 |
0 |
240 |
| GST taxable disbursements |
70 |
4 |
0 |
74 |
| Home Inspection |
350 |
18 |
0 |
368 |
| Total Closing Costs |
611,160 |
30,047 |
35 |
641,242 |
| July 1, 2010 On |
|
| |
Cost (1) (2) |
HST @ 12% |
Total |
Additional Tax |
| Buyer |
|
|
|
|
| Purchase Price plus taxes and rebates |
588,235 |
50,589 |
638,824 |
8,824 |
| Property Transfer Tax |
9,765 |
0 |
9,765 |
(235) |
| Notary Fees (legal): |
500 |
60 |
560 |
0 |
| Non taxable disbursements |
240 |
0 |
240 |
0 |
| GST taxable disbursements |
70 |
8 |
78 |
4 |
| Home Inspection |
350 |
42 |
392 |
24 |
| Total Closing Costs |
599,160 |
50,699 |
649,859 |
8,617 |
| |
Current Structure |
| Actual Selling Price = $600,000 |
Cost |
GST @ 5% |
PST @7% |
Total |
| Seller |
|
|
|
|
| Commision |
19,500 |
975 |
0 |
20,475 |
| Notary Fees (legal): |
500 |
25 |
35 |
560 |
| Non taxable disbursements |
240 |
0 |
0 |
240 |
| GST taxable disbursements |
70 |
4 |
0 |
74 |
| Discharge of builder’s mortgage |
200 |
0 |
0 |
200 |
| Total Closing Costs |
20,510 |
1,004 |
35 |
21,549 |
| July 1, 2010 On |
|
| |
Cost (1) (2) |
HST @ 12% |
Total |
Additional Tax |
| Seller |
|
|
|
|
| Commision |
19,206 |
2,305 |
21,511 |
1,036 |
| Notary Fees (legal): |
500 |
60 |
560 |
0 |
| Non taxable disbursements |
240 |
0 |
240 |
0 |
| GST taxable disbursements |
70 |
8 |
78 |
4 |
| Discharge of builder’s mortgage |
200 |
0 |
200 |
0 |
| Total Closing Costs |
20,216 |
2,373 |
22,589 |
1,040 |
(1) Selling price with embedded 2% PST removed
(2) PST on overheads claimed as ITCs has not been considered in the price of commission and
other services
If you own a business
The business community will realize benefits from the HST since businesses will be able to claim input tax credits for the PST component of the tax. This will lower costs.
What do you think of the HST? Let me know at apeck@royalpacific.com
Thank you,
Andrew Peck, Vice-president and General Manager
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