GST Relief Could Be En Route for First-Time Home Buyers

Tackling the Housing Affordability Crisis: Bill C-4

Canada’s housing affordability crisis continues to be a key concern for policymakers and Canadians alike. In response, the federal government has introduced Bill C-4, the Making Life More Affordable for Canadians Act, which had its first reading in the House of Commons on June 5, 2025. The bill proposes a broad package of affordability measures, including personal income tax reductions and carbon pricing changes. However, for many prospective homeowners, the most notable aspect of Bill C-4 is found in Part 2, which proposes substantial amendments to the Excise Tax Act (the “ETA”) to introduce a new GST rebate program for first-time home buyers purchasing newly built homes (the “FTHB GST Rebate”). While this legislation is still early in its parliamentary process and subject to change, it signals promising relief for Canadians entering the housing market for the first time.

Overview of the Proposed FTHB GST Rebate

Under the ETA legislation currently in force today, home buyers may qualify for the current GST new housing rebate on newly built homes with a purchase price under $450,000. However, the rapid escalation in housing prices has rendered this price cap increasingly irrelevant in many markets. Bill C-4 proposes to create a separate GST rebate specifically for first-time home buyers, with a significantly increased maximum price threshold of $1.5 million. These changes are implemented through amendments to sections 123(1), 254(2.1), and related provisions of the ETA.

Key Elements of the FTHB GST Rebate

The proposed FTHB GST Rebate introduced in Bill C-4 establishes specific eligibility criteria based on the timing and nature of a residential property purchase. To qualify for the rebate under the draft legislation, the following conditions must be met:

• The rebate will be retroactively effective as of May 27, 2025.

• Applies to agreements of purchase and sale entered into after May 26, 2025, and before January 1, 203,1 of a single unit residential complex or a residential condominium unit.
• Construction or substantial renovation must begin before 2031 and be substantially completed before 2036.
• Ownership must be transferred before 2036
• The purchaser must:
  • be acquiring the property for use as their primary place of residence at the time they become liable or assume the agreement for purchase and sale;
  • be the first occupant of the home after construction or renovation; and
  • be a first-time home buyer at the time when ownership of the property is transferred.

Qualifying as a First-Time Home Buyer: Who Is Eligible?

To qualify for the FTHB GST Rebate under the current proposed legislation, a purchaser will have to meet the definition of a “first-time home buyer”, which will be introduced by amendment to section 123(1) of the ETA. A person will qualify for the FTHB GST Rebate if they satisfy each of the following requirements:

• Are 18 years of age or older at the time of purchase;
• Are a Canadian citizen or permanent resident;
• Have not occupied, as their primary residence, any home they owned (including co-op housing) in or outside Canada in the preceding four previous calendar years up to the date of acquisition;
• If they have a spouse or common-law partner, the spouse or common-law partner also has not occupied such a residence that they owned during that same period.

Rebate Amount

The value of the FTHB GST Rebate available to a qualified first-time home buyer will depend on the purchase price of the new home as follows:

• Full rebate (up to $50,000) if the purchase price is $1 million or less.
• Phased-out rebate for homes priced between $1 million and $1.5 million, using a linear formula:
  • Rebate = C × [($1,500,000 − D) ÷ $500,000] Where:
    • C is the lesser of $50,000 and the total GST paid by the purchaser.
    • D is the total consideration (i.e., the purchase price of the home).
• No rebate if the home price is $1.5 million or more.

Key Differences Between the Current New Housing Rebate and the Proposed FTHB GST Rebate

While the structure of both rebates is similar — each providing relief from GST on the purchase of new residential housing — there are several key differences under the proposed FTHB GST Rebate introduced in Bill C-4. Most notably, the purchase price threshold is substantially increased: the current rebate begins to phase out at $350,000 and is eliminated entirely at $450,000, whereas the FTHB GST rebate allows for a full rebate up to $1,000,000, with a gradual phase-out up to $1,500,000. The maximum rebate amount is also significantly higher — a 100% GST rebate up to $50,000, compared to a 36% GST rebate up to $6,300 under the existing federal rebate program. Additionally, the FTHB GST rebate imposes stricter eligibility criteria, including the requirement that the buyer be a first-time home buyer as defined by a four-year look-back period, and that they be the first occupant of the home after construction. By contrast, the current rebate is more flexible — it does not impose any ownership history requirements and allows the home to be acquired for first-time occupancy by a qualifying relation of the purchaser.

What This Means for Buyers and the Real Estate Industry

At the time of writing, Bill C-4 has only passed its first reading in the House of Commons and may be subject to various amendments if it is passed into law; however, it is an important signal that the federal government is actively attempting to address the affordability challenges that are preventing Canadians from entering the housing market. If passed, these changes would provide tangible financial relief of up to $50,000 for eligible first-time home buyers.

At KH/Dunkley Law Group, our team understands the complexities of real estate transactions and stays up-to-date with legislative developments that affect your rights. Whether you’re a new buyer purchasing your first home, or an experienced builder selling property, our team is prepared to guide you every step of the way.