AU#46: GST Waiver Explained
Read Time: 2 minutes
On Sept. 14, 2023, Prime Minister Justin Trudeau announced that the federal government is removing Goods and Services Tax (GST) on new purpose-built rentals.
The Ontario government quickly followed, removing PST.
Is this a game changer, or just another policy flop? Let's dive in.
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Feds Waive GST - Explained
Since many of you are based in Ontario - we'll use Ontario as for an example.
In Ontario, the Harmonized Sales Tax (HST) is a combination of the federal Goods and Services Tax (GST) and the Provincial Sales Tax (PST).
Rental developers pay HST.
The HST Breakdown:
Ontario's HST is composed of a 5% GST (federal component) and an 8% PST (provincial component), totalling 13%. Once rebates are applied - rental developers end up budgeting 7 - 8% for HST.
So if you build a $20M apartment, you'll pay $1.5M in taxes.
This is a game-changer. Rental developers are now saving 7 - 8%.
Reaction from Insiders:
There is still a lot that needs fixing - property tax abatements, faster timelines etc. - so developers are weary of giving too much praise to the fed.
But - this is a significant milestone. A friend of mine mentioned, "This is the most impactful policy change we've seen in the last 10 years!"
Given the high interest rate environment, many rental developments had been shelved. In light of this news, many of those projects are now feasible (i.e. see Dream announcement)
As it stands - any developer who starts construction after September 14th will be exempt.
Critics would argue that even projects currently under construction (but not occupied) should get the benefit since those rental projects could still theoretically be converted to condos(more on this later).
To summarize - you'd never confuse me for a Trudeau voter...
But credit where credit's due. This is a step in the right direction.
👋 P.S. I've already helped my clients sell $243M in 2023 (see recent deals).
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