GST Relief for First-Time Home Buyers: Considerations and Risks from a Legal Perspective

Summary of the Rebate Program

On May 27, 2025, the federal government announced plans to introduce a new GST rebate for first-time home buyers across Canada (the “FTHB GST Rebate”). The FTHB GST Rebate will eliminate the GST for first-time home buyers on eligible new homes up to $1 million and reduce the GST for first-time home buyers on eligible new homes between $1 million and $1.5 million.

Note, however, that as of the date of this blogpost, the proposed legislation has not been enacted yet, as Bill C-4 is still working its way through Parliament, currently at consideration in committee in the House of Commons.

Who is eligible as a first-time home buyer?

For an individual to qualify as a first-time home buyer for the purposes of the FTHB GST Rebate, the individual must:

be at least 18 years of age;
be a Canadian citizen or a permanent resident of Canada;
acquire or build the new home for use as their primary place of residence;
be the first individual to occupy the home as a primary place of residence; and
not have lived in a home, whether in or outside Canada, that the individual or their spouse or common-law partner owned in the current calendar year or the four preceding calendar years.

The FTHB GST Rebate is not available to a corporation or a partnership.

Which new homes are eligible for the FTHB GST Rebate?

The FTHB GST Rebate will generally apply to the same types of housing with similar eligibility criteria and conditions as the existing GST/HST New Housing Rebate. Broadly speaking, a first-time home buyer may be eligible for a FTHB GST Rebate if:

they buy a new home from a builder;
they build, or hire someone to build, a home on land they own or lease; or
they buy shares of a co-operative housing corporation.

Furthermore, under the GST/HST New Housing Rebate, if a home has been substantially renovated, it is generally treated as a newly built home. The FTHB GST Rebate most likely will apply to substantially renovated homes, too.

During which time period is the FTHB GST Rebate available?

The timing requirements regarding eligibility for FTHB GST Rebate are summarized in the table below:

Type of New Home	New Home Purchased from Builder	New Home built by Owner	Shares of a Co-Operative Housing Corporation
Timing Requirement	the agreement of purchase and sale for the home is entered into with the builder on or after May 27, 2025 and before 2031; andconstruction of the home begins before 2031 and the home is substantially completed before 2036.	construction of the home begins on or after May 27, 2025 and before 2031 and the home is substantially completed before 2036.	the agreement of purchase and sale of the share is entered into with the co-op on or after May 27, 2025 and before 2031; andconstruction of the cooperative housing begins before 2031 and is substantially completed before 2036

What is the amount of the FTHB GST Rebate?

Together with the existing GST/HST New Housing Rebate (where that rebate is applicable), the FTHB GST Rebate would provide a 100% rebate of the GST payable on new homes valued up to $1 million, representing a saving of up to $50,000.

For new homes valued between $1 million to $1.5 million, the FTHB GST Rebate will be phased out in a linear manner. Examples of FTHB GST Rebate are shown in the table below:

Value of Home	Rebate Percentage	Amount of Rebate
$500,000	100%	$25,000
$900,000	100%	$45,000
$1,000,000	100%	$50,000
$1,050,000	90%	$45,000
$1,125,000	75%	$37,500
$1,250,000	50%	$25,000
$1,375,000	25%	$12,500
$1,500,000	0%	$0

The key thing to note is that, given the currently available guidance, the rebate percentage above for homes valued between $1 million to $1.5 million is always multiplied by the $50,000 figure, which is the maximum amount of rebate possible under the FTHB GST Rebate, and not multiplied by the actual GST payable on such purchase. However, for homes valued under $1 million, the actual GST payable is used for the calculation as such buyers are already getting a 100% rebate.

Given the base effect, this has some interesting implications for the FTHB GST Rebate:

the GST savings on the purchase of an eligible new home valued at $900k is the same as the savings on the purchase of an eligible new home valued at $1.05 million in absolute terms;
the GST savings on the purchase of an eligible new home valued at $500k is the same as the savings on the purchase of an eligible new home valued at $1.25 million in absolute terms, and so on.

There is no rebate available for new homes valued at over $1.5 million.

What are some of the rules limiting the availability of the FTHB GST Rebate?

To ensure that the rebate is available as intended to first-time home buyers after the announcement date, certain rules would apply to the FTHB GST Rebate as follows:

an individual would not be permitted to claim a FTHB GST Rebate more than once in their lifetime;
an individual would not be permitted to claim a FTHB GST Rebate if their spouse or common-law partner previously claimed a FTHB GST Rebate;
if, pursuant to an assignment sale, a first-time home buyer assumes the rights and obligations of another person that is a buyer of a new home under an agreement of purchase and sale with a builder, the FTHB GST Rebate would not be available if that original agreement of purchase and sale was entered into before May 27, 2025;
if an agreement of purchase and sale for a new home was originally entered into before May 27, 2025 and the agreement is subsequently cancelled and a new agreement of purchase and sale is entered into (or the agreement is varied or altered to effect that outcome), the FTHB GST Rebate may be disallowed in respect of the sale of a new home under the new agreement (and would not be allowed in respect of the varied or altered agreement).

Potential Combined Tax Savings with BC Property Transfer Tax Exemption

In the Province of British Columbia, a first-time home buyer who qualifies for the federal FTHB GST Rebate may also simultaneously qualify for the newly built home exemption or the first-time home buyers’ program for the provincial Property Transfer Tax (PTT) in respect of their transaction. Between the two PTT exemptions, the newly built home exemption has a higher fair market value threshold and greater potential in savings. Starting from April 1, 2024, the fair market value threshold for a full exemption of PTT for newly built homes in BC has increased to $1.1 million. Individuals who may be eligible for such PTT exemption should review the requirements and conditions carefully, as they may not completely align with the federal GST rebate requirements. However, it is likely that many buyers of new homes in BC in the next few years will be completely exempt from both the GST and PTT.

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Considerations and Risks for Builders

Like the existing GST/HST New Housing Rebate, the FTHB GST Rebate may be assigned and obtained through the builders, which is generally the industry practice and home buyers’ preference. However, builders should keep in mind that the financial consequences of non-compliance with the FTHB GST Rebate can be significant. It might not be sufficient for the builders to simply rely on the representations made by the buyers, as the buyers often do not fully understand the eligibility criteria or occasionally would intentionally misrepresent certain facts to the builders. Prudent builders should:

develop a detailed eligibility checklist for potential first-time home buyers and a robust due diligence process for verifying the requisite information;
include additional buyer representations and warranties either in the agreement of purchase and sale or a statutory declaration or both; and
keep complete and accurate records of such transactions.

One specific risk is that, given the effective date of May 27, 2025 for the FTHB GST Rebate, home buyers who entered into an agreement of purchase and sale or an assignment agreement for new homes prior to that date may be tempted to amend the agreement or terminate and enter into a new agreement in order to become eligible for the rebate. However, this has been anticipated by the legislators and is strictly prohibited based on the guidance available so far. If a builder assists a buyer in their attempt to circumvent the rule in this manner, the builder could be deemed by CRA to have collected GST/HST on any forfeited deposits paid under the original agreement as well as the full transaction price under any new agreement and be liable to pay or repay such amounts to CRA, not to mention any administrative penalties.

Considerations and Risks for Lenders

Most buyers of new homes would likely require financing to complete their purchases. Lenders that lend on such purchases of new homes where the FTHB GST Rebates are claimed are potentially exposed to the same risks faced by the builders as discussed above. In Canada, CRA can attach a super-priority lien against a debtor’s assets to recover outstanding GST/HST liabilities, and the courts have confirmed that the amounts paid to a secured creditor by such debtor are deemed to be held in trust for CRA and captured by such lien. Furthermore, outside of a couple of limited exceptions, the secured creditor’s security is always subordinate to that of CRA even if the secured creditor had no knowledge of the GST/HST debt.

In the context of the FTHB GST Rebate, a prudent lender should:

conduct proper due diligence on the buyers who are claiming or have claimed the rebate, and obtain appropriate evidence from the buyers to support their rebate claim;
at the time of the financing or refinancing transaction, consider arranging for lender title insurance policies that include a super-priority lien endorsement, if available; and
consider requiring borrowers to authorize the lender to verify their outstanding GST liabilities with CRA on an ongoing basis.

Considerations and Risks for Prospective Home Buyers

Prospective home buyers who believe they may qualify for the FTHB GST Rebate should review and fully understand the eligibility criteria for the rebate themselves before entering into any agreement of purchase and sale or any contract to build a new home. If the home buyer simply relies on the advice from a builder or a realtor and the advice turns out to be wrong and results in the home buyer being unable to claim the FTHB GST Rebate, it might be difficult for the home buyer to seek remedies from such builder or realtor or back out of the transaction without forfeiting the deposit. Even if the home buyer is successful in obtaining remedies in such a scenario, it most likely would still be a time-consuming, stressful, and potentially costly process.

If a home buyer has already completed the purchase of a new home and claimed the FTHB GST Rebate, and CRA subsequently revokes the rebate after an audit, then CRA could potentially register a tax lien against the title to the property until the home buyer has repaid the rebate. Generally speaking, any property with a tax lien on title would face significant difficulties in any subsequent sale or financing, not to mention that it would also almost certainly constitute a breach under any existing mortgage on title.

Conclusion

The FTHB GST Rebate could potentially provide significant tax savings to eligible first-time home buyers of eligible new homes within the specified time periods. However, great care must be taken in assessing the full eligibility criteria for the rebate, as any misunderstanding or misstep could result in significant liability for each of the home buyer, the builder, or the lender. It would be prudent for each such party to consult their tax or legal advisors prior to entering or closing transactions in which the FTHB GST Rebate will be claimed.

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This blog post is for information purposes only and is not a substitute for legal advice. Readers are cautioned to not rely on or take any action based on the information provided. If you have any questions regarding first-time home buyer exemptions, please reach out to Desmond Wang for a complimentary consultation. You can book a consult on www.macushlaw.ca through our booking system or call 604-900-7611.