Last week the federal government announced two program changes that could affect a significant number of small to medium-sized businesses across Canada. The new measures include an enhancement of the GST Rental Rebate on new rental housing and an extension of the Canada Emergency Business Account (CEBA) repayment deadline.
Here’s what you need to know:
Enhanced GST Rental Rebate
In a move designed to encourage developers to build more rental housing (with the aim of enhancing affordability for average Canadians), the government is increasing the GST Rental Rebate to 100 per cent from 36 per cent, a measure that “… removes the existing GST Rental Rebate phase-out thresholds [e.g., for units valued between $350,000 and $450,000] for purpose-built rental housing projects.” The change effectively eliminates the GST on the construction of new rental buildings, which also includes apartment buildings, senior residences and student housing. There will be no cap on the value of a rental unit that qualifies for the rebate.
The change will apply to projects that commence construction on or after September 14, 2023, and on or before December 31, 2030. Qualifying projects will need to complete construction by December 31, 2035. The enhanced GST Rental Rebate is effective immediately, pending the passage of implementing legislation. Note that until that legislation is passed, the technical details of the GST Rental Rebate enhancement are subject to change.
The government estimates that the enhanced GST rebate will deliver savings of $25,000 on a rental apartment unit valued at $500,000.
To qualify for the rebate, a purpose-built rental building must have at least:
- Four private apartment units
- 10 private rooms or suites (e.g., for senior or student housing)
- 90 per cent of residential units designated for long-term rental
Buildings that are currently non-residential, but are converted to a residential building and meet the aforementioned conditions, will qualify for the enhanced GST Rental Rebate. Individually-owned condominium units, duplexes, triplexes and single-unit housing will not qualify for the enhanced rebate; neither will renovated residences. As the government notes, the measure “ … is intended to stimulate new supply, not take supply off the market.”
Canada Emergency Business Account repayment and partial loan forgiveness deadlines extended
Ottawa also announced another extension to the Canada Emergency Business Account (CEBA) loan repayment deadline to qualify for partial loan forgiveness. Businesses or not-for-profits that took CEBA loans during the COVID-19 pandemic (which were intended to help qualifying applicants cover operating costs) will now have until January 18, 2024, to repay their loans and receive forgiveness of as much as 33 per cent of the value of their loan (equaling $10,000 on a $40,000 loan and $20,000 on a $60,000 loan).
Borrowers that make a refinancing application to the financial institution that issued their CEBA loan by the January 18th deadline will have until March 28th, 2024, to repay their outstanding balance and qualify for partial loan forgiveness. Loans that are not repaid by the deadline will convert to three-year term loans, with interest payable at 5 per cent per annum. The term loan repayment date will be extended by one year to December 31st, 2026, from December 31st, 2025.
Have questions about the enhanced GST Rental Rebate or CEBA loan repayment deadline extensions? Contact a member of our team today.
Tony Sokic, Managing Partner