Enhanced GST Rental Rebate
Under pressure to respond to widespread concerns about the cost of living, the government announced the removal of GST on new rental construction.
The enhanced GST Rental Rebate will 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.
The removal of the GST will not be retroactive and but will apply to projects that completed construction recently. Projects that begin construction between September 14, 2023 and December 31, 2030 have to also complete construction before December 31, 2035.
The Government of Canada is calling the change the "enhanced GST rental rebate" because it is eliminating the GST through an 100% rebate. Prior to the change, the Government provided a 36% rebate on the GST on rental units with a fair market value between $350,000 and $450,000.
Previously, under what were called "self-supply" rules, developers of rental buildings were required to pay the 5% GST on the fair market value of the project upon completion. However, developers of strata condominiums did not, because the GST is paid by the individual homebuyers.
To be eligible for the new 100% rebate, rental buildings would also have to meet certain criteria, having 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% of residential units designated for long-term rental.
The enhanced GST rental rebate will not apply to single-family homes, duplexes, and triplexes. It will also not apply to housing co-ops, owned houses situated on leased land, and residential trailer parks, but the Government of Canada says these forms of housing will continue to qualify for the 36% GST rebate.
To avoid renovictions, the enhanced GST rental rebate will not apply to substantial renovations of existing residential complexes. However, it will apply to conversions of non-residential space into residential units, such as office conversions. Public service bodies will also be eligible for the rebate.
The enhanced GST rental rebate will not be permanent.