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GST Tax Cut provides some relief for Real Estate transactions.

Effective July 1, 2006, the Tory government has announced a decrease in the GST from 7% to 6%. This move, combined with a small increase in the basic personal exemption for federal income tax, will save about $650 per year for families in the $45k to $60k annual income bracket. The estimate from the Finance department is that this decrease will save Canadians about $8.7 billion over the next two years.

This reduction could provide those who are planning a real estate transaction this spring with a pleasant surprise.

What you need to know:
1. July 1st is the demarcation date. If ownership or possession transfer occurs before that date, the 7% GST applies; after that date it doesn't.

2. If an agreement of purchase and sale is signed after May 2nd, with the deal closing after July 1st, the 6% rate applies.

3. Buyers who signed a purchase agreement on or before May 2nd and whose GST is based on the 7% rate, will be able to claim a transitional adjustment** from the Canada Revenue Agency. What does this mean for consumers? For a client buying a $200,000 home, it means a $2000 saving up front. It will also result in savings on all the associated fees that get paid out to lawyers, appraisers, home inspectors and movers. Not to forget the furniture and appliance purchases.

**To claim a Transitional Rebate, a person must complete an application form and file it with the CRA. If a new housing rebate is available in respect of the purchase, the individual who claimed the new housing rebate is the individual who claims the Transitional Rebate. When the application form becomes available you will be able to obtain it on the CRA Web site (www.ccra.ca) or by calling 1-800-959-2221.

www.truenorthmortgage.ca