Supporting GST Reform: What Proposed Changes to the New Home Rebate Could Mean for Ontario Buyers
As housing affordability continues to dominate national headlines, one proposed federal measure could offer immediate relief for many homebuyers: a full GST rebate on newly built homes priced up to $1 million. If enacted, this would represent a major update to Canada’s long-standing Goods and Services Tax (GST) housing rebate rules under the Excise Tax Act, and could mean thousands in direct savings for Ontario buyers.
At Rabideau Law, we support this potential reform. A streamlined, expanded rebate would directly reduce closing costs and promote access to more affordable, newly built homes, especially in markets like the Greater Toronto Area, where the average cost of a new-build often disqualifies buyers from receiving the full rebate under current rules.
We also believe the Province of Ontario should follow suit. The provincial portion of the HST New Housing Rebate, which currently uses similar price thresholds, should be updated in tandem to reflect today’s pricing realities. Without provincial alignment, buyers could still face substantial closing costs even if the federal portion is modernized.
Current Law: How the GST New Housing Rebate Works
Under the Excise Tax Act, RSC 1985, c E-15, purchasers of a newly constructed or substantially renovated home may be eligible for a GST New Housing Rebate under section 254. The rebate refunds a portion of the 5% federal GST paid on the purchase of:
- A new or substantially renovated owner-occupied home;
- A new leasehold interest in land;
- Or the construction/renovation of a home on land you already own.
To qualify, the home must be used as the primary place of residence by the purchaser or a close relative.
Under current law:
- Homes priced $350,000 or less (before tax) qualify for the maximum federal rebate of 36% of the GST.
- Homes priced between $350,000 and $450,000 are eligible for a partial rebate on a sliding scale.
- Homes priced above $450,000 are not eligible for any federal GST rebate.
The provincial portion of the HST rebate in Ontario follows a similar structure, offering a 75% rebate of the Ontario portion of the HST (up to $24,000) but capping eligibility at $350,000 with a sliding scale up to $450,000, beyond which the provincial rebate is eliminated entirely.
How Much Could Buyers Save?
Let’s compare potential scenarios for a buyer purchasing a new-build home at $749,000:
Under Current Rules:
- GST (5%): $37,450
- Rebate: $0 – not eligible (over $450,000)
Under Proposed Federal Reform:
- GST (5%): $37,450
- Rebate: $13,482 (36%)
- Savings: ~$13,500
If the provincial government matched this structure:
- Ontario HST portion (8%): $59,920
- Full 75% rebate (up to $24,000) applied to homes up to $1M
- Buyer would receive an additional $24,000 rebate on top of the federal portion
Total savings if both levels align: potentially over $37,000 on a $749,000 purchase—an amount that could cover legal fees, land transfer tax, and closing adjustments entirely.
Why the Current Rules Are Outdated
The existing thresholds were introduced in an era when $450,000 could buy a fully detached home. In 2024, the average price of a new home in Ontario, particularly in major cities like Toronto, Kitchener-Waterloo, or Ottawa, often exceeds $800,000. Even townhouses and starter condos now fall outside the rebate range, effectively excluding the very buyers these rebates were designed to support.
Without an update, the HST system penalizes affordability: new homes come with a full 13% HST burden, while resale homes are exempt. This discourages new development and disproportionately affects first-time buyers who are looking at newly built entry-level housing.
Rabideau Law’s Position
We fully support the proposed federal reform to extend the GST New Housing Rebate to homes priced up to $1 million. It reflects a much-needed modernization of the Excise Tax Act and would bring the rebate system in line with today’s housing market.
We also call on the Province of Ontario to update the provincial rebate structure to match the proposed federal changes. Without provincial alignment, buyers will still face significant closing costs and financial uncertainty, even under a revised federal framework.
What Buyers Should Know
If these changes are adopted, buyers of homes of up to $1 million will benefit from:
- Predictable and accessible rebates, removing the current sliding scale;
- Lower closing costs, which can improve mortgage qualification ratios;
- Faster financial decision-making for builders and purchasers;
- Legal clarity, especially in pre-construction agreements.
But until changes are formally passed and proclaimed, buyers must structure agreements carefully. At Rabideau Law, we review builder contracts to ensure buyers are protected regardless of whether the rebate changes move forward.
Buying Pre-Construction? Let’s Talk Strategy
We offer:
- Pre-construction contract review
- HST/GST clause guidance
- Flat-fee closing packages
- Virtual signing across Ontario