Canada creating a Real Estate Task Force to ensure tax-compliance
By Newinhomes on May 31, 2019
According to the government of Canada and the Canada Revenue Agency, tax non-compliance and money laundering can be a significant factor causing the rising cost of housing in the country’s hottest markets.
Since 2015, CRA audits have led to more than $1 billion in additional gross taxes in the real estate sector, with 41,700 files reviewed in Ontario and British Columbia, leading to more than $100 million in assessed penalties.
Canada’s Budget 2019 stated that a Real Estate Task Force would be created to ensure tax compliance, and it was just announced that $50 million over the next five years will be spent on developing the Task Force, with $10 million of ongoing funding.
"The Government of Canada is committed to ensuring that Canadians benefit from a strong, stable housing sector,” says The Honourable Diane Lebouthillier, Minister of National Revenue. “With Budget 2019's proposed multi-year funding for the CRA's work on the real estate sector, we will create a new Real Estate Tax Force and increase our efforts to combat non-compliance to better ensure tax rules in the real estate sector are followed by all Canadians." (this is the first time we’ve seen it referred to as a ‘tax force.’)
The Real Estate Task Force will focus on the Greater Toronto and Greater Vancouver areas, as they are the most expensive and active housing markets in the country.
The Task Force will ensure the sale of a principal residence is reported on tax returns, that capital gains tax is applied (when principal tax exemption not applied), that income from real estate flipping is reported, that commission from real estate sales is reported as income, and that builders of new residential units are remitting the appropriate amount of GST/HST.
When you sell a property that is not your principal residence, you have to report it as business income or income from capital gains. If you don’t do this, you could end up being audited and paying a hefty penalty. If the value of your property decreased compared to what you spent when you purchased, it can be reported as a business or capital loss.
The smart thing to do when investing in real estate is to play by the rules. The taxes we all pay support the quality of life for Canadians everywhere. Not filing taxes properly for your real estate investments affects people on many levels from increased housing prices to less funding for necessary infrastructure development and repairs.
