Does GST apply to sale of a rental property (previously a principal residence)?
Saturday, June 26th, 2010 at
7:01 pm
This rental property (a condominium unit) has been rented out for 5 years, but before that, it had been lived as a principal residence by my parents (now deceased) for about 10 years.
I realise that GST does not apply to the residential rent, or sale of used residental property, but GST may apply to portion to used residential property converted to business use (e.g., dental office).
My question is whether rental constitutes a business, that attacts GST? And, if GST applies, will there be exemption for years being owned as a principal residence? Thanks.
Sell and Rent Back
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Tagged with: Dental Office • Principal Residence • rent property • Residential Property
Filed under: rent property
I would say that the GST does not apply to the sale of your rental property for the following reasons:
- it is a used residential property that has been lived by people rather than for commericial purpose
- the fact that it was a pricipal residence before may be of no conseqence now for GST, because there was a deemed disposition 5 yrs ago when u rented it out. But again, there should be a GST implication 5 yrs ago.
- it is generally that the status of the vendor will determine whether or not GST must be dealt with in the transaction. In your case, u are not in the business of building or selling properties, like a builder or developer which needs to pay GST. A sale of a dwelling from the builder attracts GST. However, rental of a dwelling by a builder prior to sale changes the status of the building and GST will not be attracted on the sale of it. But, GST will be payable by the builder on the fair market value at the time of renting it.