An Alberta buyer is purchasing a new construction home from a builder for $550,000. How does GST apply to this transaction?

Q: What is the correct answer to: An Alberta buyer is purchasing a new construction home from a builder for $550,000. How does GST apply to this transaction?

The correct answer is GST at 5% applies to new construction, but the buyer may qualify for a partial GST new housing rebate if the home will be their primary residence. Option B correctly states that 5% GST applies to new construction and that buyers may qualify for a partial GST rebate if using the home as a primary residence. The rebate phases out between $350,000 and $450,000 and is unavailable above $450,000. For the $550,000 property in the question, no rebate is available, making the full GST payable.

Q: What background knowledge is needed for this Mortgage & Real Estate Finance question?

GST at 5% applies to new construction homes in Canada. The GST new housing rebate provides up to 36% of the GST paid (maximum $6,300) for homes priced at or below $350,000 used as a primary residence. The rebate phases out proportionally between $350,000 and $450,000, and disappears entirely above $450,000. Resale homes are exempt from GST. Alberta has no provincial sales tax component.

Q: What is a good way to remember the answer to this Mortgage & Real Estate Finance question?

New construction: 5% GST applies. Rebate possible under $450K. Resale homes: no GST. Remember '350-450 phase-out zone' for the new housing rebate eligibility. On the exam, first determine if the property is new construction or resale. If new, GST applies. Then check the price against the $350K-$450K rebate thresholds to determine rebate eligibility.

Q: What exam tip applies to this Mortgage & Real Estate Finance question?

Watch for questions using property prices above $450,000 with new construction—these are designed to test whether you know the rebate is unavailable at higher prices. Full GST applies with no rebate.

Q: How does this Mortgage & Real Estate Finance concept apply in real world practice?

A buyer purchases a $550,000 new-build home in southeast Calgary. The builder charges 5% GST ($27,500). Since the price exceeds $450,000, the buyer receives no GST new housing rebate and must pay the full $27,500 GST, which can be included in the mortgage amount if the total remains within lending limits.

Question

Mortgage & Real Estate FinanceABHARD

An Alberta buyer is purchasing a new construction home from a builder for $550,000. How does GST apply to this transaction?

Answer Options

A

GST is never charged on residential property in Alberta

B

GST at 5% applies to new construction, but the buyer may qualify for a partial GST new housing rebate if the home will be their primary residence

C

GST applies only to the land, not the building

D

GST is charged at a reduced rate of 2.5% on new Alberta homes