May 16th, 2024
Last September, the government announced a temporary elimination of the GST on new purpose-built rental housing projects, such as apartment buildings, student housing, and seniors’ residences built specifically for long-term rental, thanks to the enhanced GST rebate for residential rental property for eligible new projects.
However, under current GST/HST rules, universities, public colleges, and school authorities are generally not eligible for a GST residential rental property rebate on new student residences due to special rules that apply to these entities.
In fact, one of the main conditions of eligibility for this rebate is that the unit is for long-term rental. Generally speaking, the first use of the unit must therefore be as an individual’s primary place of residence under a lease for a period of at least 12 months. The more temporary nature of student residences means that they often do not qualify for this refund.
The current rules are also different for universities, public colleges, and school authorities building a new residence for their students, since they are not subject to the usual GST/HST rules for builders requiring payment of tax on the final value of a newly constructed residential complex.
Modifications proposed by the 2024 federal budget
The 2024 Budget proposes to amend the Excise Tax Act to allow universities, public colleges, and school authorities that operate on a not-for-profit basis to apply the usual GST/HST rules that apply to other builders (i.e., pay GST/HST on the final value of the building) in relation to new student housing projects. This easing of conditions would allow these entities to claim the 100% rebate on any new student residence they acquire or build, provided it is used primarily to house their students, without the requirement that the first use of these units be as an individual’s primary place of residence under a lease for at least 12 months.
These proposed changes would apply to student residences whose construction begins after September 13, 2023, but before 2031, and ends before 2036.
