What is HST ?… and how will it affect me ?
Hello Everybody! This is a really important issue that will affect every single person in Ontario.
There seems to be SO MANY opinions and outlooks, so lets try to sum it up…
With new Canadian mortgage rules (April 19th), a new harmonized sales tax in some provinces (July 1, 2010) and the possibility of higher interest rates set to kick in this summer, home buyers are on a tear that is likely to keep markets busy leading to this summer, but then what ?.. we all have the same question……
What is the HST?
As announced in the 2009 Ontario Budget, the Provincial Sales Tax (PST) will be replaced with a more modern, “value-added tax” that will be combined with the federal Goods and Services Tax (GST) to create a Harmonized Sales Tax (HST) for Ontario, effective July 1, 2010. The provincial portion of the HST will be eight per cent and the federal portion will be five per cent, for a combined HSTrate of 13 per cent.
Things that were not subject to the current 8{ea18e790148ddb141722068dfb73f9f74b06205fa18c7d39ece0e7144d0672b8} PST will be now taxed. As a result, things that were not previously taxed under the current Ontario Provincial Sales Tax (PST) will be taxed at 8{ea18e790148ddb141722068dfb73f9f74b06205fa18c7d39ece0e7144d0672b8}.
The new 13{ea18e790148ddb141722068dfb73f9f74b06205fa18c7d39ece0e7144d0672b8} tax will therefore apply to things like your electric bill, your gas bill, your water bill, condominium fees, insurance premiums, and every other good and service you purchase. There are almost no exemptions.
The current Ontario PST tax does not apply to services, nor does it apply to the purchase of certain goods. The new 13{ea18e790148ddb141722068dfb73f9f74b06205fa18c7d39ece0e7144d0672b8} tax will therefore extend the old 8{ea18e790148ddb141722068dfb73f9f74b06205fa18c7d39ece0e7144d0672b8} PST tax rate to the purchase of all goods and all services.
The New 13{ea18e790148ddb141722068dfb73f9f74b06205fa18c7d39ece0e7144d0672b8} tax will apply to the purchase of all New homes. If a person were to purchase a new $1,000,000 home in Toronto , they would have to pay roughly $200,000 in taxes as a result of the Ontario land transfer tax, the new city of Toronto land transfer tax, and the new harmonized 13{ea18e790148ddb141722068dfb73f9f74b06205fa18c7d39ece0e7144d0672b8} GST/PST.
Think about that and what that “may” do to real estate values in cities such as Toronto ..
It could cause property values to fall and decrease the new home construction industry and the jobs it creates.
And it “may” not be long before you’ll hear our elected representatives telling us that, because of the harm that has been inflicted to the new home construction industry by the new 13{ea18e790148ddb141722068dfb73f9f74b06205fa18c7d39ece0e7144d0672b8} tax, it would be “fair” to extend the new 13{ea18e790148ddb141722068dfb73f9f74b06205fa18c7d39ece0e7144d0672b8} tax to sales of existing homes.
The New 13{ea18e790148ddb141722068dfb73f9f74b06205fa18c7d39ece0e7144d0672b8} tax is an assault on your primary residence Canadians have had two things that they have always been able to count on as being tax free – things that they could use to save money and accumulate wealth. They are your: …… (a) primary home; and (b) RRSP. That’s it.
Why could this hurt us ? Because if a purchaser has to pay almost $200,000 in taxes to buy your $1,000,000 home, the purchaser is going to want to pay less to you for your home. The purchaser may want to reduce the amount he or she is willing to pay to you in order to pay all the taxes.
The New 13{ea18e790148ddb141722068dfb73f9f74b06205fa18c7d39ece0e7144d0672b8} tax could effectively raise your income taxes currently, the combined Federal/Ontario income tax rates are roughly 25{ea18e790148ddb141722068dfb73f9f74b06205fa18c7d39ece0e7144d0672b8} on the first $20,000 of taxable income, 42{ea18e790148ddb141722068dfb73f9f74b06205fa18c7d39ece0e7144d0672b8} on the next $40,000 of taxable income, and 46.5{ea18e790148ddb141722068dfb73f9f74b06205fa18c7d39ece0e7144d0672b8} on each dollar of taxable income over $60,000. On top of that you have to add the “Fair Share Health Tax” of up to $1,000 each of us has to pay.
When the Ontario Government implements their new harmonized GST/PST sales tax of 13{ea18e790148ddb141722068dfb73f9f74b06205fa18c7d39ece0e7144d0672b8}, the top effective income tax rates in Ontario may be as follows (since you can’t spend any of your tax paid dollars without paying the new harmonized 13{ea18e790148ddb141722068dfb73f9f74b06205fa18c7d39ece0e7144d0672b8} GST/PST tax):
38{ea18e790148ddb141722068dfb73f9f74b06205fa18c7d39ece0e7144d0672b8} on the first $20,000
53{ea18e790148ddb141722068dfb73f9f74b06205fa18c7d39ece0e7144d0672b8} on the next $40,000
59.5{ea18e790148ddb141722068dfb73f9f74b06205fa18c7d39ece0e7144d0672b8} on every dollar over $60,000
On top of that, you have to pay your Ontario Fair Share Health Tax, your city realty taxes, your city garbage fees, your city water fees, your city street parking permit fees, your annual Ontario vehicle license plate fees, your Ontario land transfer tax, ( maybe more for your new city of Toronto
land transfer tax ), your gasoline taxes, your liquor taxes, your air departure taxes, your entertainment taxes, and so on.
Here are some of the points that our Governments are promoting:
For your Home Buyers:
The HST will not apply to resale homes.
Enhanced New Housing Rebate
Buyers of new homes will receive a rebate of up to $24,000 regardless of the price of the new home.
This rebate ensures that buyers of homes priced up to $400,000 (about three-quarters of new homes built in Ontario) will, on average, pay no more – or possibly even less – tax than under the PST system.
New Rental Housing Rebate
New rental housing, including residential investment properties, will receive a similar rebate. This rebate will also support affordable rental housing in Ontario.
Transitional Rules
For some purchases of new homes that straddle the implementation date of July 1, 2010, the provincial portion of the HST will not apply, depending on when the written agreements of purchase and sale were entered into and when ownership or possession are transferred.
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