Tax Insights: GST relief for first-time home buyers on new homes valued at up to $1.5 million

Issue 2025-25

In brief

What happened?

On May 27, 2025, the newly elected federal government tabled a Notice of Ways and Means Motion before Parliament to introduce a bill that would implement the First‑Time Home Buyers’ GST Rebate (the rebate). The rebate will eliminate the goods and services tax (GST) (or the federal component of the harmonized sales tax (HST)) on the purchase of newly constructed homes and condominiums valued at up to $1 million by eligible first‑time home buyers. The amount of the rebate will be gradually phased out for first‑time home buyers who purchase eligible homes valued between $1 million and $1.5 million.

The rebate is only available if the agreement of purchase and sale is entered into with the builder after May 26, 2025. There are specific rules that will apply when an agreement is assigned or terminated (including to purchase a different property from the builder), thus making it unlikely for first-time home buyers to qualify for the rebate if they had previously entered into an agreement with a builder to purchase a new home.

Why is it relevant?

The rebate is intended to help eligible first-time home buyers buy homes by providing them with up to $50,000 in savings when they purchase a newly constructed home. As the rebate is not available to first-time home buyers that had previously entered into an agreement before May 27, 2025, there may be buyers that want to terminate their agreement so that they can purchase another property in the hopes of qualifying for the rebate. Builders should be aware of the GST/HST issues that may arise when an agreement is terminated, because it may result in:

• the builder being deemed to have collected GST/HST on any forfeited deposits, and
• a future sale of property not qualifying for the rebate  

Actions to consider

Builders should implement appropriate procedures to address the GST/HST implications of:

• properties that are being sold to purchasers who may be eligible for the rebate
• agreements of purchase and sale entered into before May 27, 2025 that are subsequently terminated

If the builder plans to pay or credit the rebate to the purchaser, they must take steps to verity that the purchaser is an eligible first-time home buyer who qualifies for the rebate, and obtain representations and warranties from qualifying purchasers. 

In detail

First-Time Home Buyers’ GST Rebate

First-time home buyers who purchase newly constructed homes may be eligible for the First‑time Home Buyers’ GST Rebate. To qualify for the rebate, the purchasers of the home must be “first‑time home buyers,” as well as meet the requirements for the existing GST/HST New Housing Rebate; this includes acquiring the new home for use as their primary place of residence and being the first individual to occupy the home as a place of residence.

Builders are permitted to pay or credit the amount of the rebate to the purchaser, thus allowing the builder to effectively claim the rebate on behalf of the homebuyer.

Who is eligible for the rebate?

The rebate is available to individuals who are:

• at least 18 years of age and either a Canadian citizen or a permanent resident of Canada
• first-time home buyers at the time at which ownership of the home is transferred and the buyers have not lived in a home that:
  • they (or their spouse or common-law partner) owned, and
  • was their primary place of residence (whether in or outside Canada),

in the calendar year or in the four preceding calendar years

• at the time the buyer becomes liable (or assumes liability) under the agreement of purchase and sale, acquiring the home as their primary place of residence, and
• the first to occupy the home as a place of residence after the construction (or substantial renovation) of the residential complex is substantially completed

Which homes are eligible for the rebate?

Homes that are eligible for the rebate are:

• new homes purchased from a builder; a home generally includes:
  • a detached or semi‑detached single‑unit house, a duplex, a condominium unit and a townhouse
  • a unit in a co‑operative housing corporation
  • a mobile home (including a modular home) and a floating home
• owner‑built homes, including those built by hired contractors
• shares in a cooperative housing corporation

When is the rebate effective?

The rebate will generally be available:

• for agreements of purchase and sale entered into after May 26, 2025 and before 2031:
  • for new homes purchased from a builder
  • for shares of a cooperative housing corporation
• for owner-built homes that begin construction after May 26, 2025 and before 2031

The construction of the home must begin before 2031 and be substantially completed, with the ownership transferred to the buyer, before 2036.

How much is the rebate?

For new homes valued at:

• $1 million or less, the rebate will equal 100% of the GST or federal portion of the HST (saving first‑time homebuyers up to $50,000)
• between $1 million and $1.5 million, the maximum amount (i.e. $50,000) of the rebate will be gradually phased out and fully eliminated at the $1.5 million value (e.g. for a home valued at $1.25 million, the rebate would be $25,000)
• $1.5 million and above, no rebate is available

Limitations of the rebate

To ensure that the rebate is available as intended (to first‑time home buyers), the following rules limit the availability of the rebate in certain circumstances:

• the rebate is available only once for each individual
• if an individual’s spouse or partner has previously claimed the rebate, the individual is not eligible
• assignment sales are not eligible if the original agreement was signed before May 27, 2025, and
• if an agreement of purchase and sale for a new home was entered into before May 27, 2025 and the agreement is later varied, altered or assigned, it will be deemed to have been entered into before May 27, 2025 and therefore would not be eligible for the rebate; this includes situations where the purchaser (or a non‑arm's length party) agrees to buy a different home from the builder (or a different builder that is not dealing at arm’s length with the original builder) when the new agreement is not reasonably being entered into “primarily for bona fide purposes” other than to obtain the rebate  

The takeaway

It is unfortunate that the rebate will not be available in situations where a qualifying individual agreed to purchase a home before May 27, 2025, particularly when the Prime Minister’s Office had stated on March 20, 2025 that “the Government of Canada will eliminate the Goods and Services Tax (GST) for first-time homebuyers on homes at or under $1 million.” In other words, first‑time homebuyers who may have entered into an agreement to buy a newly constructed home after this announcement in anticipation of the rebate (but before May 27, 2025), will not qualify for the rebate when they eventually purchase the home. 

As the financial implications of the rebate can be significant, it will be interesting to see what factors the Canada Revenue Agency will consider when determining whether a purchaser entered into a new agreement “primarily for bona fide purposes” other than to obtain the rebate. For example, agreeing to purchase a larger condominium (e.g. two bedrooms versus one bedroom) would presumably qualify for the rebate if the buyer wanted the larger condominium for purposes of growing their family.

At the date of publication, the provinces that impose HST (New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario and Prince Edward Island) have not announced whether they will be relieving the provincial component of HST on new home sales to first‑time homebuyers. To the extent that this relief is forthcoming, this could further frustrate first‑time homebuyers who entered into an agreement to purchase a new home before May 27, 2025.

Since builders can pay or credit the rebate to the purchaser (which is generally the industry practice with the existing GST/HST New Housing Rebate), builders should be duly diligent when determining whether the purchaser qualifies for the rebate. If the builder knew or should have known that the home buyer was not entitled to the rebate, the builder will be jointly and severally liable to repay the amount of the rebate. Accordingly, builders should start preparing for sales that may be eligible for rebate, including obtaining representations and warranties from qualifying purchasers.

PwC can help builders determine if the rebate is available on the sale of their homes and be aware of any issues that may arise.