In the midst of our world being turned upside down by COVID-19, it may have gone unnoticed that on March 18, 2020, the Provincial Government made changes to how PST is applied to new homes constructed in Saskatchewan. This should come as welcome news to home builders and potential buyers who have argued that the addition of 6% Provincial Sales Tax on construction, which came into effect on April 1, 2017, has made homes less affordable and resulted in less homes being built and purchased.
B. PST Rebate for New Home Construction
Effective March 31, 2020, The PST for New Home Construction Plan provides relief in the form of a PST rebate to individuals who purchase or build a newly constructed home and take possession of it as a primary residence between April 1, 2020 and March 31, 2023. To be eligible for the PST rebate the home must have a total value of less than $450,000. This does not mean that there is NO PST on new homes under $450,000; rather the PST rebate is a percentage of the total PST associated with the construction and is calculated based on the pre-tax value of the house.
The value for the purpose of calculating the amount of the PST rebate (if any) is determined by the total purchase/construction price, minus the land value and any furniture, furnishings and appliances contained in the new home (the “Value”).
Additionally, it is worth noting that only individual persons, not corporations or partnerships, are eligible for the rebate
An area that will likely need to be clarified is the inclusion, or exclusion, of appliances in calculating the rebate. The PST rebate is intended to exclude appliances EXCEPT where:
(a) the appliances are not invoiced separately and comprise the “all in” price for the home;
(b) are normally provided by a builder in a new home package; and
(c) the purchaser does not have the option to opt out of the appliance package.
D. Definition of Home
The definition of home is quite broad and includes all single or detached single-unit houses, duplexes, condos, townhouses, units in a housing co-op, and even mobile or modular homes.
Because of the requirement that the house be the owner’s primary residence and that the owner takes possession during the rebate period, rental properties or properties the owner intends to live in in the future do not qualify for the rebate. Personal care homes and special care homes are also excluded for the PST rebate.
E. Applicable Percentage of Rebate
For homes that have a Value (again, this does not include the price of the land) of up to $350,000, the rebate will be 42% of the total PST paid. For homes that have a Value of between $350,000 to $450,000 the rebate will be a percentage of the maximum allowable rebate for a home with a $350,000 Value depending on how much over $350,000 your home Value is.
The following example demonstrates how this would work for a home valued at $350,000:
(a) New Home #1 has a total cost of $450,000, which includes a land value of $100,000. In this instance, the home Value for the purpose of the PST rebate would be $350,000 ($450,000 - $100,000). The total pre-rebate PST would be $21,000 ($350,000 x 6%); therefore, the rebate would be $8,820 ($21,000 x 42%); and
(b) If New Home #1 has a land value of $150,000 instead of $100,000, the Value would be $300,000 ($450,000 - $150,000). The total pre-rebate PST would be $18,000 ($300,000 x 6%); therefore, the rebate would be $7,560 ($18,000 x 42%).
The amount of the PST rebate decreases as the Value gets closer to the $450,000 ceiling, which has been set as the maximum home Value eligible for the PST rebate. This is demonstrated in these two further examples:
(a) New Home #2 has a total of cost $500,000, which includes a land value of $100,000, giving it a home Value for the purpose of the PST rebate of $400,000 ($500,000 - $100,000). The PST rebate is $4,410 ([$450,000 - $400,000} / $100,000] x $8,820); and
(b) If New Home #2 has a land value of $51,000 instead of $100,000, the home Value for the purpose of the PST rebate would be $449,000 ($500,000 - $51,000) and the PST rebate would be $88.20 ([$450,000 - $499,000} / $100,000] x $8,820).
This might seem like a lot of math but it’s actually fairly simple – consider it this way, the rebate is a sliding scale, when you purchase a house for $350,000 you are eligible for the maximum rebate (as in New Home #1). For every thousand dollars over $350,000 the Value of the home is, you are eligible for 1% less of the rebate. This works all the way up to the maximum $450,000, where your home Value is 100 times $1000 more than $350,000; therefor 1% x 100 = 100% and your PST rebate is $0!
Home Value $350K $375K $400K $425K $450K
PST Rebate $8,820 $6,615 $4,410 $2,205 $0.00
Like the GST rebate on new home construction, the PST rebate can be applied whether you build your own home or purchase from a builder. The purchaser can apply for the rebate, or assign the rebate to the builder and have that amount deducted from the contract price, provided agreement is reached with the builder.
It is important when entering into a contract, either to build a home or to purchase a newly constructed home, that the contract is clear with respect to how the PST rebate is being credited and who the funds will go to.
It is also advisable to ensure there is a clause in the contract that lays out what the value of the land is so that a reference exists for the purpose of calculating the PST rebate.
For new home construction built by the owner, the application form for claiming the PST rebate is below. Please note information is required to verify land ownership, and a summary of the building costs:
PST Rebate Application Form – Owner Built
For a new home purchased from a builder, the link to the application form for claiming the PST rebate is below. A copy of the sales contract is required:
PST Rebate Application Form – Builder Built
If you have any questions, or for more information contact:
Rylund Hunter (firstname.lastname@example.org);
Clayton Barry (email@example.com); or
any member of the McDougall Gauley LLP Residential and Commercial Real Estate Practice Team.
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