Look out Ontario :: more taxes are coming your way

 

Is the bad news about our economy, the slumping housing industry, and more lost jobs enough to have you down and out?  Wait there is more bad news heading our way.  Yes the poor, beat-up and overtaxed Canadian family is about to face more taxes.  Primarily, the tax is directed at the housing industry so if you plan to buy a newly constructed home, or sell your home, you will be facing this new tax in Ontario.

Announced on March 26, 2009, the Ontario Liberal Government, Dalton McGuinty, is fine-tuning their annual provincial budget which is scheduled to take effect on July 1, 2010.  The new budget is going to merge the current 8% PST and 5% GST, into a new “harmonized” tax.  If you think that is a harmless undertaking, have a close look at what services will now be taxed:

Buyers who purchase a newly constructed home, after July 1, 2010, where the value is greater than $400,000, will be required to pay a 13% tax.   For example, if you purchased a house for $500,000, the additional tax, added into the mix, would stick you with a  $65,000 tax.    It is important to mention, that this harmonized tax would not apply to re-sale homes.  This has Ontario home builders especially worried as they are already dealing with excess inventory now and current deterioration of prices.   With the introduction of this tax, newly-built, higher-priced homes will be very difficult to sell. 

If you are planning to sell your home, after

July 1, 2010

, you would be required to pay a 13% blended tax rate.  The new 13% tax rate will replace the current 5% GST calculated on a realtor’s commission. Here below is an example of what a $400,000 sale price might look like, comparing today’s 5% GST and the coming 13% blended tax.  This 13% tax will apply on the service, regardless of the sale price of your home.  The tax will be charged, whether you utilize the services of a professional real estate agent or a discount service provider.  Realtors, no doubt, will be facing disgruntled sellers who will push even harder to negotiate the commission down because of the new added costs a seller will face: a higher tax, a lower home value and less cash room for sellers to maneuver.   The 13% tax will be a big burden especially since real estate values are predicted to face challenges right into 2010, when the new tax is introduced.

Sale Price of the Home = $400,000
Now			After July 1, 2010
Real Estate Fees			Real Estate Fees
5% to Realtor	$20,000		5% to Realtor	$20,000
5% GST	$1,000		13% harmonized tax	$2,600
Total Selling Cost	$21,000		Total Selling Cost	$22,600

 

The list of affected services, does not stop there.   The following, in the services industry will also be required to top up their invoice with this new 13% tax:

- legal services

- home inspection services

- landscaping

- renovation services

- land survey services; and there are others too.

Of course the Ontario Government is really beginning to lick their lips with glee, as this new tax is estimated to bring in over $300 MILLION in tax revenues, and the revenues are only estimated for the closing of homes sales alone.

I am thinking.....a move to Alberta is looking really good right now as they do not pay provincial sales tax!!

This blog was written by Elizabeth Blair, a licensed Mortgage Agent with Mortgage Edge in Richmond Hill,Ontario. 

Elizabeth services mortgage clients in Mississauga and all over the Greater Toronto area.

You can contact Elizabethdirectly by phone at (905)510-5785

by email at eblair@mortgageedge.ca

or you visit her website at:    www.missmortgage.ca 

Elizabeth is licensed with the Financial Services Commission of Ontario and is also a Member of IMBA (the Independent Mortgage Brokers Association of Ontario) www.imba.ca

Lic # M08005880

Brokerage Lic # 10680

Head office is located at: 

15 Wertheim Court, Suite 210, Richmond Hill, Ontario, Canada.