The Government of Canada is promoting the Canadian dream of buying your first house by offering several incentives. There is a first-time home buyer incentive, new construction funding for indigenous housing, and a tax-free first home savings account (FHSA). On May 27, 2025, the newly elected federal government proposed a 5% goods and services tax (GST) rebate for first-time home buyers (FTHB) on newly constructed homes. 

On June 5, 2025, the federal government introduced Bill C-4, which has yet to receive royal assent. If enacted, the 5% GST rebate will apply to qualified house purchases after May 26, 2025. The date is of the essence here, as houses purchased before May 26, 2025, may not qualify, which could encourage homebuyers to cancel their sales. However, that won’t help because any alteration or replacement in the agreement entered into before May 27, 2025, will still render the sale ineligible for the rebate. 

In this article, we will understand the specifics of the proposal and how FTHBs and builders can prepare for this rebate. 

What is The Proposed First-Time Home Buyers GST Rebate

Every house purchased in Canada is subject to a 5% GST. The proposal aims to give complete relief from GST to FTHB who buy qualified new homes directly from the builder for use as a primary residence. Like every tax benefit, this rebate also has conditions. 

The full 5% GST rebate up to $50,000 will be available on eligible new homes priced up to $1 million and will be phased out for homes priced between $1 million and $1.5 million. No rebate is available for homes priced above $1.5 million. 

The Objective Behind the First-Time Home Buyers (FTHB) GST Rebate

The objective of this rebate is to make it affordable for Canadian households to buy their first principal residence. Hence, the GST rebate is available to an individual only once in a lifetime. If your spouse or common-law partner has already claimed this rebate, you cannot claim it.

Another objective is to boost the construction of new homes across Canada. Hence, the $50,000 tax saving is only available for newly constructed homes. 

FTHB who are buying old homes can still avail themselves of the existing GST/HST New Housing rebate that refunds homebuyers 36% of the GST amount (up to $6,300) they paid to buy a new house priced up to $350,000. This rebate phases out for homes priced between $350,000 and $450,000, with no rebate available for houses priced above $450,000.

The FTHB GST rebate is a federal rebate. Homebuyers can also avail themselves of any provincial tax benefits. 

Eligibility For First-Time Home Buyers GST Rebate

The eligibility for the New GST rebate goes beyond the house price and rebate calculations. To ensure the rebate is not misused for house flipping, the CRA has listed strict eligibility criteria based on who is buying, what they are buying, how they are buying, and when. All these criteria ensure that the rebate goes to a Canadian household buying their first primary residence in a newly constructed property.

For a First-Time Buyer to qualify for the FTHB GST Rebate, they must:

• Be a Canadian citizen or permanent resident above 18 years of age and are buying the property for use as their primary place of residence.
• Be the first to occupy the place as a primary residence after the construction or substantial renovation. 
• Or their spouse or common-law partner should not have owned and lived in a home, inside or outside Canada, in the calendar year or in the four preceding calendar years. This ownership also includes owning shares in a cooperative housing corporation that confer possession rights to the residential unit in or outside Canada. 

The FTHB GST Rebate is only applicable to newly constructed residential condominium units or a single unit residential complex (detached or semi-detached), which are:

• Purchased from a builder
• Built on land owned or leased by the FTHB 
• Purchased as a share of the capital stock of a cooperative housing corporation that confers the right to possess a residential unit in a residential complex.

Limited Period GST Rebate

The proposed GST rebate is for a limited period from May 27, 2025, to January 1, 2036. Hence, the purchase, construction, and ownership of a qualifying home should be completed within this time period.

• Purchase: The agreement to purchase, construct, or buy shares must be entered into on or after May 27, 2025, and before January 1, 2031. 
• Construction: The construction of the house should begin before January 1, 2031, and be substantially completed before January 1, 2036. 
• Ownership: The FTHB should get possession or ownership of the house before January 1, 2036.

Why Is GST Rebate Relevant for a Builder?

Builders of residential property are permitted to claim the rebate on behalf of the homebuyer and repay that amount to the homebuyer. Builders can start preparing to apply the GST rebate in their sales process. This will require careful scanning of the purchaser’s eligibility for the rebate. A professional accountant can help you set up the process so you can avail yourself of the rebate if it is enacted.

Builders should maintain caution, as many buyers may want to terminate their purchase agreement to purchase another property and qualify for the rebate. The CRA may deem the builder to have collected GST/HST on any forfeited deposits and may disqualify any future sale of that property for the GST rebate.

Contact Ford Keast LLP in London to Help You Navigate the First-time Home Buyer Incentive

Talk to a professional accountant to help you understand the eligibility of the GST rebate and implement the changes in a compliant manner. At Ford Keast LLP, our accountants and tax consultants are updated with changes in tax laws and can provide services such as GST filing. To learn more about how Ford Keast LLP can provide you with the best accounting and tax planning expertise, contact us online or call us at 519-679-9330.