While maintenance fees are HST exempt, condo corporations are likely to pass their new costs on to owners
Published on Monday, Jun. 21, 2010 6:00AM EDT Last updated on Tuesday, Jun. 22, 2010 1:12PM EDT
Condo fees may not be subject to HST, but that doesn’t mean condo owners won’t be dinged by the tax.
Alan Kwan, a 32-year-old recruiter for a headhunting firm in downtown Toronto, says he expects to be hit with higher condo fees in a year’s time, after the managers of his building have gone over their financial statements and totted up their additional costs from the Harmonized Sales Tax.
As of July 1, condo corporations in Ontario and British Columbia will begin paying HST on certain expenses, including lawn care, snow removal, service calls and, in Ontario, electricity and heating. According to a study by the mortgage-comparison website RateSupermarket.ca, those expenses could add up to an extra $38 a month being passed on to condo owners through their monthly fees, based on the average fee for a 1,000-square-foot Toronto condo.
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“Because we’re dealing with residential rents, that’s what’s called an exempt supply, so there’s no recovery of the HST by the condo owner,” said Janice Roper, the lead indirect tax partner at Deloitte & Touche’s Vancouver office. “So presumably … they will pass that on, and those fees will by definition go up.”
Mr. Kwan, who pays $330 a month in fees for his 730-square-foot condo, says that with 70 per cent of his building occupied by renters, it’s unlikely the condo owners will have much of a voice when it comes to protesting against fee increases.
“You have to bite the bullet,” he says. “You can’t really do much about it. It’s taxes. It’s always going to be there.”
House owners and buyers will also face buried fees, Ms. Roper said. “There are a number of these exempt types of activities, particularly in the residential housing area, and there will be underlying costs that have HST on them now – 7 or 8 per cent more than the GST was – and that will end up getting passed on, but they won’t see it as tax added. It will be kind of buried in there.”
While there’s no HST on resale homes, there is on certain services associated with closing a deal, including real-estate commissions for sellers, moving costs, home inspections and legal fees in Ontario. The Ontario Real Estate Association says this could add more than $2,000 in new tax for a resale house priced at $360,000.
With just over a week to go before the HST is implemented, home owners and buyers are still largely unaware of the additional costs they will be facing, says Kelvin Mangaroo, founder of RateSupermarket.ca.
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A recent survey by his site shows 56 per cent of 383 respondents admitted having “no knowledge” of how the HST will affect them, while a further 24 per cent said they had “a little knowledge.” Only 20 per cent said they felt knowledgeable about the effects of the HST.
“There seems to be a lot of confusing, conflicting information out there, and some of the specialists are unsure of how this is going to go,” Mr. Mangaroo said. “At the end of the day, owning a home or buying a house and moving home is going to get more expensive, and I think people just need to get expert tax advice to see how their individual situations will be affected by the HST.”
“A lot of people just don’t understand taxes very well, and while there has been some information out there, it’s difficult for people to understand all the different implications of a value-added tax,” Ms. Roper added. “The average person, until they actually see the taxes on their bill, they won’t really know which things are going to be taxed and which won’t.”