Have you ever finished a brand new build and posted a rental ad the same day you got occupancy? It feels harmless. In a recent Tax Court of Canada case from Ottawa, that simple step helped sink the owner’s GST HST new housing rebate. Let me show you what the judge focused on and the separate HST rule that applies if your real plan is to build to rent.
Why this matters
The owner built new housing rebate can put tens of thousands back in your pocket when you build your own home in Ontario. But CRA looks at what you do, not what you say. If your first steps look like investing rather than living, the rebate can disappear.
Quick FYI, if you built your own home and you qualify
You may be able to claim two parts in Ontario:
- Federal part on the 5% portion: up to $6,300
- Ontario part on the 8% portion: 75% of the provincial HST you paid
- Up to $24,000 if HST was paid on the land
- Up to $16,080 if HST was not paid on the land
Max combined in Ontario: about $30,300.
Action step: When you file, claim both parts and clearly note whether HST was paid on the land. That detail sets your Ontario cap.
The recent court case at a glance
Here is the pattern the judge saw in Charlebois v. The King, 2025 TCC 76.
- The owner built a two storey house on vacant land in Ottawa and received an occupancy permit.
- An online listing to rent the property went up the same day the occupancy was issued.
- A separate basement unit was completed and rented later that year.
- The main and second floor were listed and leased later.
- The entire property was eventually transferred into a corporation.
- The owner applied for the owner built new housing rebate, saying the house was built as a primary residence. CRA denied the claim.
And yes, CRA uses the internet too. They can search listings the same way we do. If there is a public ad that says “brand new rental,” expect it to show up in your audit file.
What the judge looked for
Primary place of residence
You must have built the home to be your primary place of residence. Think home base. The court looked for objective signs of real life: furniture in place, belongings moved in, driver’s licence and CRA address updated, insurance as owner occupied, utilities and internet active in your name, deliveries and mail going to the address, and a routine that fits work or school.
First to occupy
You or a relation must be the first person to occupy the home. Occupy means real living, not a quick sleep on a mattress.
Red flags that sink owner built claims
A rental listing the day you receive the occupancy permit
- Tenants getting possession before you genuinely live there
- Sparse signs of life: no internet, no deliveries, no address changes
A quick transfer to a corporation; a corporation cannot have a primary residence
What the judge decided
The appeal was dismissed. The judge did not accept that the house was built to be a primary residence, and the evidence did not show that the owner was the first true occupant. Early rental activity and a later transfer to a corporation pointed to investment use. Because the two tests were not met, both the federal and Ontario owner built rebates were denied.
Important
Losing the rebate is not the end of it. The judge only ruled on the owner built rebate tests. The Court did not decide anything about the build to rent self supply rule. That separate rule can still apply.
When your facts show build to rent, you may have to self-assess HST on the fair market value (FMV) of the property when it is ready for tenants or when the first tenant gets possession. For context, an appraised value was provided by the appraiser during refinancing time for at least $1,250,000 in the spring, and when the property was later transferred into a corporation, the owner recorded $1,325,000. Numbers like that show how big the HST bill can be if self supply applies.
Build to rent means HST at completion
If your plan is to keep the new build as a rental, the self supply rule applies. In plain language, the law treats you as if you sold the new property to yourself when it is ready for tenants.
What this means for you
You must self assess and remit HST on FMV at that time.
- For a single home or condo, the trigger is usually when you give possession to the first tenant.
- For a multi-unit building, the trigger is the later of substantial completion and the first unit being occupied.
- Substantial completion is roughly 90% complete so the space is reasonably habitable.
Can you reduce the hit? Yes.
You can usually claim input tax credits (ITCs) for the HST you paid on construction costs and major improvements that relate to the self-supplied rental.
- If the land seller charged HST, that HST may also be eligible for ITCs.
- After the self supply, you can often claim the New Residential Rental Property (NRRP) rebate to recover part of the HST, up to the usual caps ($6,300 federal and $24,000 Ontario per qualifying unit).
Simple scale check
Suppose FMV on the trigger date is $1,325,000. • HST at 13% = $172,250 to self-assess.
- HST at 13% = $172,250 to self-assess.
- Less ITCs you built up on construction and land HST, say $48,000 (for illustration purpose only).
- Net after ITCs = $124,250.
- Then apply for the NRRP rebate. Based on the value of the property, you likely qualify for $24,000, your net could drop to $100,250.
These are illustrative numbers. Your ITCs and rebate depend on your facts, invoices, and whether HST was charged on the land.
Checklist to prove primary residence
Use this if you want the owner built rebate.
- Move in fully. Put furniture in place and take dated photos of lived-in rooms.
- Switch your life. Update driver’s licence, CRA address, banks, insurance, and school records if needed. Keep confirmations.
- Turn on hydro, gas, water, and internet in your name from move-in day. Keep the first bills.
- Build a paper trail. Keep delivery receipts and regular mail to the address.
Wait on rental activity until your own occupancy is clear and supported
Checklist for build to rent
Use this if you plan to keep the property as a rental.
- Register or confirm your HST account before the first tenant gets possession.
- Determine FMV at the trigger date and keep valuation support.
- Self assess and remit HST in the correct reporting period.
- Claim ITCs on eligible construction and land HST to reduce the bill.
- Apply for the NRRP rebate as soon as you are eligible.
- Budget for cash flow. The self supply payment is real money even if a rebate comes later.
Bottom line
Decide your plan before you hit occupancy.
- If it is home first, live there in a real way and keep proof for the owner built rebate.
- If it is build to rent, budget for the self-assessed HST on FMV, use ITCs to offset what you can, and apply for the NRRP rebate right away.
And remember, CRA has Wi-Fi too. If you post a “brand new rental” ad on day one, expect them to find it.
If you want to make sure you are not leaving money on the table, book a consultation with my team. We help everyday Canadians navigate the tax side of real estate so you can keep more of what you earn.
Until next time, happy Canadian Real Estate Investing.
Cherry Chan, CPA, CA
Your Real Estate Accountant
