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NEW HOUSING REBATE FOR BUILDERS

TCC LOWERS THE BAR FOR "OCCUPATION AS A PLACE OF RESIDENCE"

As we have blogged here and here, homeowners who sell their newly built homes shortly after taking possession have long been a target of CRA audits.  When these homeowners also claim the GST/HST New Housing Rebate, the CRA reviews their claims closely.

A key issue in these New Housing Rebate claims is whether the homebuyers occupied the property as a place of residence after completion of construction.  In the past, courts have applied a stringent standard in interpreting what constitutes “occupation as a place of residence”.

In a recent decision, Sharma v. The King (2025 TCC 145), the Tax Court of Canada (“TCC”) lowered the bar for establishing “occupation as a place of residence”, signalling an attenuated interpretation that favours taxpayers.

Sharma v. The King

In Sharma, the appellant and her husband purchased a newly constructed home, which they described as their “dream home.”  After closing, however, they spent limited time there: the appellant was frequently away on business, and the couple stayed at their parents’ home on weekends.  They rarely cooked and never did laundry at the home.  The appellant subsequently sold the property.

When the New Housing Rebate was claimed, the CRA denied the application, arguing that the appellant had not occupied the property as a place of residence. 

Citing Gill v The Queen (2016 TCC 13), the CRA asserted that the appellant’s use of the property lacked an element of permanence, and that transitory occupancy cannot satisfy the occupancy requirement under paragraph 254(2)(g) of the Excise Tax Act.

The TCC disagreed.  Referring to Sindhi v The Queen (2023 TCC 102) and Gorgis v The King (2024 TCC 109), the TCC emphasized that the occupancy test under paragraph 254(2)(g) merely requires that the property be occupied as a place of residence, not as the primary residence.  The TCC further noted that some unascertained degreeof residency may nonetheless meet the occupancy test for the New Housing Rebate purpose.

On the facts, the Court found that despite spending limited time at the property, the appellant and her husband had moved personal belongings into the home, had no other residence during the relevant period, and occasionally slept at the property.  Taken together, these factors were sufficient to establish occupancy, and the appellant was therefore entitled to the New Housing Rebate.

Takeaways

The Sharma case marks a significant development in how TCC interprets “occupation as a place of residence” under the GST/HST New Housing Rebate provisions.  The Court lowered the bar from the stricter approach in Gill, adopting a more flexible, attenuated interpretation that favours taxpayers.

That said, determining eligibility for GST/HST New Housing Rebate remains highly fact driven.  As with most tax disputes, outcomes often hinge on a mix of favourable and unfavourable facts.  Taxpayers facing similar issues should seek legal advice tailored to their specific circumstances.

For help with GST/HST New Housing Rebate, please click here.

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