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A NEW LOOK AT GST/HST HOUSING REBATES

"FRUSTRATION" IN CRA HOME REBATE ASSESSMENTS

Federal tax legislation in Canada encourages the construction and renovation of residential homes through a range of tax rebates.  However, eligibility for these rebates is not always clear-cut.

In the recent case at the Tax Court of Canada (“TCC”) – Osagie v. The King, 2025 TCC 114 – the Court concluded that a homeowner was eligible to claim a GST/HST “new housing rebate” without satisfying all legislated conditions.  This decision suggests that eligibility for GST/HST housing rebates may be broader than previously thought.

Osagie v. The King

In Osagie v. The King, a home buyer (the “Appellant”) agreed to purchase a pre-construction home shortly before the onset of the COVID-19 pandemic.  By the time construction was completed (right in the middle of the pandemic), the Appellant delayed moving in and leased the home to an unrelated third party for six months.  The decision was driven by logistical and financial difficulties, along with a mistaken belief that regional lockdowns prohibited relocation.

The Canada Revenue Agency (“CRA”) denied the Appellant’s claim for a new housing rebate under subsection 254(2) of the Excise Tax Act (“ETA”), arguing that:

1. She had not intended to use the property as a primary place of residence; and
2. She or a relation was not the first to occupy the property, as required.

On appeal, the TCC disagreed.  It held that the evidence, including the Appellant’s eventual move into the home, demonstrated the necessary intention to use it as a primary place of residence. 

While the Appellant or her family was not the first to occupy the property (a clear statutory condition), the TCC found that this requirement had been “frustrated”.  The TCC appeared to place weight on (1) the family’s reduced income and (2) children having already begun the school year (among other factors) and concluded that the Appellant had “no real choice” but to delay occupancy and rent the home.  On that basis, the TCC allowed the rebate.

Why Do I Care?

The Osagie case marks an expansion of the legal doctrine of frustration in GST/HST rebate caselaw.  Historically, frustration has seen limited success in the GST/HST context, and pandemic-related frustration arguments have failed. 

The case is distinguished from many prior caselaw where legitimate “frustrating events” prevented rebate claimants from moving into their new homes.  In Osagie, the Appellant was able to move in after first leasing the home.

By accepting a more flexible view of the doctrine of “frustration”, the TCC may have opened the door to greater rebate eligibility.  This decision may also influence the interpretation of other tax rules applicable to home building and renovation sectors, which are extremely complicated and nuanced.

Takeaways

The Osagie case appears to signal that more circumstances may be considered “frustrating events” for the purposes of tax refunds than previously thought.  This could make more home buyers and builders eligible for GST/HST rebates even when all technical conditions are not met.

As always, the devil is in the details, and property owners and builders applying for rebates would likely benefit from legal advice. 

For those contacted by the CRA for audit on these issues, click here.

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