The very words strike fear into the heart of everyone in Ontario, from people looking at North York properties for sale to Quebecers who cross the border into our province for shopping trips. Many consumers treat the impending switchover to HST in July of 2010 as the approach of the apocalypse, but how much of this is overblown? How exactly will the switch from from GST (Goods and Services Tax, a National tax) and PST (Retail Sales Tax, an Ontario Tax) to HST (Harmonized Sales Tax) really effect your home purchase? After all, the Atlantic Provinces have had a harmonized sales tax for more than ten years.
What is HST?
In political terms, the HST is neither an increase nor a decrease in tax rates. It is a simplification of the tax collection structure. Where before there were two departments, a provincial and a national one, overseeing the collection of taxes, there will now only be one. This is bad news for anyone who relies upon a job at one or the other of the tax departments to meet the mortgage payments on their North York real estate, as they may lose their jobs in the restructuring. However, most normal people will not be affected by the actual rate, rather, they will feel the pinch as the list of items subject to taxation is overhauled.
Newly Taxable Items
This is what everyone is worried about. Prior to the harmonization of sales tax, some services such as home purchases, carpet cleanings, lawyer's fees, realtor commissions, and home inspections were not subject to provincial sales tax, only the 5% GST. Now, under the new law, the harmonized tax will be applied to these previously GST-only items, increasing their price by 8%. That means if you decide to sell your North York condo after July of 2010, you'll be paying 8% more in commission, legal fees, cleaning costs, and inspections than you would have before. It adds up, so you can see why homeowners are upset. As a homebuyer it will affect you even more, because the tax on your total purchase will increase considerably.Newly Exempt ItemsBy the same token, some items, which were previously subject to GST, will become completely exempt from taxation, which saves you money. The biggest example of this is lifting the taxation on gasoline. As a potential homebuyer, you can now think about buying North York houses instead of Toronto ones as a cheaper property means less taxation. Your commute will be longer, but that won't cost you as much as it once did since the tax on fuel for your car has been lifted.
Avoiding the Rate Hike
If you are considering buying a house, there are a few ways you can get around having to pay the increased tax rate. Firstly, if you can decide which of the North York homes for sale you want and put the paperwork through before July, you will not have to pay. Secondly, you can buy a home that costs less than $400,000. Under the new system, buyers whose properties cost them less than $400,000 can receive a rebate for the HST on their purchase. For home sellers, the only thing you can do to save money is to get the sale through before July.
