HST

Ontario’s recent budget includes a measure to harmonize the existing RST (retail sales tax) and federal GST (goods and services tax), as of July 2010. This has a lot of people concerned (including your trusty plumber in Toronto), since the new tax rate will be thirteen percent – the old eight percent RST combined with the five percent GST. People are worried that enormous segments of their lives could be affected, since the HST applies to goods and services just like the current GST. Newfoundland, New Brunswick, and Nova Scotia have similar HSTs.

Will your renovation be affected by the new HST in ways that the old RST and GST wouldn’t have touched it? Here’s a look at the truth about the HST, people’s concerns over it, and what it’ll really do to your renovation plans and general living costs.

Businesses Can Claim Greater Tax Credits

For some renovators, there may be a savings, as long as they’re a business. Any business currently allowed to claim input tax credits for GST will also be allowed to receive the same credit for the new HST. Before, you couldn’t get that kind of credit for the RST on goods and services, so that actually ends up being an increase in what you can claim. However, your business must already have been able to claim tax credits to receive this benefit.

A single return will be filed instead of the two returns that previously had to be filed. Just like with the GST, and business that sells less than $30,000 per year, or $50,000 for public service entities, won’t have to register for this tax. Large businesses can’t claim input credits for five years after the implementation of HST when it comes to energy, telecommunications, small vehicles, their fuel and their parts, and food, drink or entertainment.

Problems With Renovation And Building?

So, if the new HST will reduce paperwork and help businesses save money in the long run, why are so many people worried about its effects? Renovation services, real estate commissions, legal fees, and many other services that were previously exempt from some taxation will come under the HST. This means that your new bathroom remodel could suddenly cost you a lot more, because your plumber has to pass on the cost of the HST to you. The tax could also affect your kitchen renovations, new driveways, outdoor structures, additions and more. Many renovation companies and homeowners are concerned about the effect that this tax could have on their businesses and home expansion plans.

Home builders are also worried. After all, adding more tax to the costs of closing and labor may result in new home buyers being unable to be approved for their financing, or it may discourage people from becoming homeowners. For a $200,000 home, it’s projected to cost up to $10,000 more. Families earning less than $160,000 per year will receive three cheques totaling $1,000, while single payers who may less than $80,000 will receive less – about $300. Other taxes are also scheduled to fall, in order to help reduce the effect of the new HST. Buyers of new homes worth $400,000 or less will receive a rebate of 75% of the provincial part of the HST, as well. Will this soften the blow completely? Likely not – your renovations will still be more expensive – but it may help.

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