IMPACT OF NEW HARMONIZED SALES TAX
IMPACT OF NEW HARMONIZED SALES TAX
I’ve been known to ‘Soap Box’ here about the impact of taxes on the real estate industry, and the Liberals in Victoria have prodded me to do it again.
There is a new Harmonized Sales Tax (HST) coming to BC July 1st next year. Basically they are taxing the Provincial Sales Tax (PST) and converting it to a Value Added Tax, the same format as the GST. The Harmonizing means that one tax of 12% (5%GST and 7% Prov.) will apply to all things the GST now applies to.
The GST is already an ugly part of real estate. It only applies to new construction but a new house sale of $500,000 means a $25,000 GST charge. Add to this the GST on the commission when you sell, the house inspection, legal fees, moving fees etc. It’s reasonable to estimate $1,000 in GST paid to sell, buy and move, not including if it’s new construction.
Each of these costs where you now pay GST are currently PST exempt because they are services not goods. Under the new system these expenses will all be included in the 7% Provincial part of the HST. Based on the costs scenario above, this will add another $1400 in taxes.
As for new construction there is talk that sales under $400,000 will be exempt and sales over $400,000 will be capped at $20,000 although this is unverified at this time.
Don’t forget that you are already paying the dreaded Property Transfer Tax every time you buy a house. This new HST will be in addition to the PTT.
After July 1st next year, if you sell your current home and buy a brand new home for $500,000 you will pay the following taxes:
| Applicable Tax: | House Sale | House Purchase | |
| GST on house purchase | $25,000 | ||
| HST on house purchase | $20,000 | (new tax) | |
| Property Transfer Tax | $08,000 | ||
| GST on commissions | $0,850 | ||
| HST on commissions | $1,190 | (new tax) | |
| GST on insp, movers, etc | $00,130 | ||
| HST on insp, movers, etc | $00,180 | (new tax) | |
| Total Taxes Paid | $2,040 | $53,310 | $21,370 new tax |
The government declares that the exemption for homes under $400,000 is above the median sale price for BC. This has no relevance. People with a $500,000 home are not the rich and wealthy. Paying $53,000 in taxes to buy a 2500sf new home on a 3000sf lot (with insufficient parking) is excessive taxation. Paying HST and PTT on the same purchase is double-dipping.
The B.C. Real Estate Assn. is formulating a response to the government and I encourage you to write your MLA and press to get real estate purchases exempted from the HST. Perhaps send them this article with your personal endorsement attached.
Equity is hard enough to build without having to give an even bigger chunk to the government.