Condominium Corporations budgeting for the Harmonized Sales Tax

A challenging process that can’t be lightly undertaken!

By: John AbedRabbo, CA, CPA (IL)

On July 1, 2010, Ontario may wake up to a new Harmonized Sales Tax (HST) under the McGuinty proposed changes to the Ontario tax system. This proposed change is likely to pass given the majority government status the provincial government currently enjoys. The new tax will be based on the Goods and Services Taxes (GST) and will be administered by the Federal Government.

For the average person living in Ontario this may not seem like a big deal on the surface as the GST at 5% and the Provincial Sales Tax (PST) at 8% will be replaced with a single HST at 13%. Add the two together and things seem fine and dandy.

However, one must realize that the PST in not collected on everything that GST is collected on. The catch phrase is “services”. PST is not currently collected on services, but under the proposed budget changes, services will now cost an additional 8%. Some of the items that will be affected by this change, just to mention a few, include utility bills (gas and hydro), internet, cable, and professional fees such as lawyers and accountants. Thus, on July 1, 2010, certain items will cost a whole 8% more than what you paid for them the day before. Unfortunately, you cannot stock up on utilities! This is a huge increase in times of an economic slowdown when consumers are cutting back.

Impact on condominium corporations and fees

Under the current system and as mentioned above, gas, hydro, professional fees, management fees and most repairs and maintenance services (e.g. cleaning, landscaping, snow removal, furnace and air conditioning maintenance, etc.) are not charged PST in a condominium corporation. Thus, the HST will result in an increase of 8% to these expenses. Water expense should remain the same as it is a non-taxable item. In addition, insurance should not be affected as it is subject only to PST, which will continue, and will not be subject to HST. In terms of repairs and maintenance, it is important to note that the HST applies to the total invoice amount including material and labour, while PST applies only to the material component.

Budgeting for the Harmonized Sales Tax 09 (2)




David Pylyp; Groups are forming to fight and petition against this tax grab. There will be a major impact to all those condo owners that are on a fixed income and will have a resultant increase in their maintenence fees due to the taxes, exclusive of any normal utility and expenses paid 2009 / 2010. When is it enough?

Ongoing HST Revisions

Ontario Government Proposes Measures for New Housing

The McGuinty government is proposing measures that would build on the comprehensive tax package announced in the 2009 Ontario Budget:

• Enhanced new housing rebate - The province would enhance the new housing rebate so that new homes across all price ranges would receive a 75 per cent rebate of the provincial portion of the single sales tax on the first $400,000. For new homes under $400,000, this would mean, on average, no additional tax amount compared to the current system.
  

• New rental housing rebate - Similar to the enhanced new housing rebate, the province is proposing a rebate for new residential rental properties. This proposed rebate would support affordable rental housing across Ontario.

• Transitional rules - The province is also proposing transitional rules for new housing. Generally, as part of the transitional rules, sales of new homes under written agreements of purchase and sale entered into on or before June 18, 2009 would not be subject to the provincial portion of the single sales tax, even if both ownership and possession are transferred on or after July 1, 2010. The tax would also not apply to sales of new homes under written agreements of purchase and sale entered into after June 18, 2009 where ownership or possession is transferred before July 1, 2010.

Addition Tax details of the revised Harmonized Sales Tax

David Pylyp; OK So the Ontario Government will rebate 75% of the new Tax (HST) on Units or house acquired prior to July 1, 2010, What about the 1st time buyer's Rebate, Is that still available? Are the rebates across the board for 1st time and repeat buyers?

The Province has in place a land transfer tax refund for first-time home buyers. Information about it is available here: http://www.rev.gov.on.ca/english/refund/newhome/index.html

The enhanced housing rebate announced on Friday is only for newly constructed homes as these homes would be subject to the single sales tax when it comes into effect on July 1, 2010. Re-sale homes are not currently subject to PST and would also not be subject to the single sales tax.