HST on Assignment Sales in Ontario: How the Tax Works

Since May 7, 2022, GST/HST applies to the assignment of a new-home purchase agreement in Canada. The tax is charged on the assignment price, and for agreements signed on or after that date, the portion that simply repays the assignor's deposit to the builder is generally excluded, so tax applies mainly to the assignment premium. The assignor usually collects and remits the tax, and the assignee who ends up owning the home may still qualify for the new housing rebate. Here is how it works.

This is a deep dive that builds on our assignment sale overview, which explains what an assignment is and how the deal is structured. Here we focus on the tax. One thing up front: we are brokers, not tax or legal advisors, and this is general information, not advice for your situation. On tax questions specific to your deal, confirm with your lawyer or the Canada Revenue Agency (CRA).

The May 7, 2022 rule: assignments are now taxable

Since May 7, 2022, the assignment of an agreement to buy a new or substantially renovated home is taxable for GST/HST purposes across Canada. Before that, whether an assignment was taxable depended on the original buyer's intention, whether they had signed the deal to live in the home or to resell it, which was often unclear. The federal government removed the guesswork in Budget 2022. For assignment agreements entered into after May 6, 2022, GST/HST applies regardless of intent. This is separate from, and on top of, the GST/HST that already applies when the builder sells the finished home to its final owner.

What amount is taxed: the premium and the deposit

The GST/HST is charged on the amount you pay for the assignment, and for agreements dated on or after May 7, 2022, the part that simply repays the assignor's deposit is generally excluded, so tax applies mainly to the premium. An assignment price usually has two parts: first, reimbursing the deposit the original buyer already paid the builder, and second, a premium, the amount above that, which often reflects how much the home's value has changed since the original agreement.

Per CRA's guide GI-120, for agreements entered into on or after May 7, 2022, if the assignment agreement states in writing that part of the consideration is the reimbursement of the deposit, that deposit portion is excluded from the taxable amount and the premium is taxable. In Ontario the applicable rate is 13%. Note the older rule for completeness: for a taxable assignment under an agreement entered into before May 7, 2022, the deposit portion is included in the taxable amount. Because the wording of your assignment agreement drives how the price is split, have your lawyer confirm the allocation and confirm the treatment with the CRA.

A simplified illustration, not tax advice: say the original buyer paid the builder a $50,000 deposit and assigns the deal for a $90,000 premium, so the assignment price is $140,000. If the agreement is dated on or after May 7, 2022 and it identifies the $50,000 as a deposit reimbursement, GST/HST generally applies to the $90,000 premium, which in Ontario at 13% is about $11,700. Your actual numbers and the exact treatment should be confirmed with your lawyer or the CRA.

Who charges and remits the tax

The assignor, the person selling their contract, generally collects the GST/HST on the assignment and remits it to the CRA. Per GI-120, the assignor is usually responsible for charging, collecting, and sending the tax to the CRA, and may need to register for a GST/HST account to do so. That is a step many first-time assignors do not expect, so if you are the one assigning, talk to your accountant early about registration and remittance rather than at closing.

The non-resident rule

If the assignor is a non-resident of Canada, the responsibility flips: the assignee, the person buying the contract, must self-assess and pay the GST/HST directly to the CRA. This rule protects the tax when the seller is outside the country. If you are buying an assignment, it is worth knowing the assignor's residency status, because it changes who is on the hook to remit the tax. When residency is in question, this is exactly the kind of point to hand to your lawyer before you sign.

How this interacts with the new housing rebate

The GST/HST on the assignment is separate from the tax on the home itself, and the assignee who ends up owning the home may still qualify for the GST/HST new housing rebate on their purchase from the builder. Per CRA's new housing rebate guide RC4028, an assignee purchaser who is an individual may be eligible for the GST/HST new housing rebate, and where it applies the Ontario new housing rebate, if they meet the conditions, such as buying the home to use as their or a close relation's primary place of residence.

Keep the two amounts separate in your head: the tax on the assignment (charged on the premium) is not the same as the rebate you may claim on the home purchase from the builder. For the first-time-buyer angle and the newer federal GST rebate, see our first-time home buyer GST rebate guide, and for the full rebate picture see our new home HST rebate page. Confirm your own eligibility with your lawyer or the CRA.

What this means if you are assigning or buying an assignment

In plain terms: if you assign a pre-construction contract, expect to account for GST/HST on your premium, and if you buy one, expect that tax to be part of the deal and check who has to remit it. A few practical points:

• If you are assigning: budget for the tax on your premium, keep the deposit reimbursement clearly identified in writing in the assignment agreement, and speak to your accountant about registering and remitting.
• If you are buying an assignment: confirm whether the assignor is a resident or non-resident, understand the total tax you are financing into the deal, and check your own new housing rebate eligibility.
• For everyone: the builder usually has to consent to an assignment and may charge its own administrative fee, and the tax rules are only one piece. Get legal advice specific to your deal.

We see assignment questions most in fast-moving launches where a buyer's plans change before closing. The tax treatment is not a reason to avoid an assignment, but it is a reason to go in with clear eyes and a lawyer reading the agreement.

Where we fit in

We represent the buyer, never the developer, and on assignments that means being straight about the moving parts. We are brokers, not tax or legal advisors, so we bring in your lawyer and accountant on the numbers, and we make sure the assignment terms, the builder's consent, and the timelines are clear before you commit. For the basics of how assignments work, read our assignment sale overview. Looking at new launches where these situations come up? Register for pre-construction alerts to get price lists and floor plans first. Free to register, no obligation.