GST is applied on the sale of every newly constructed home. Remittance of the GST to the government is the responsibility of the seller, who's to charge the payable amount to the buyer as an addition to the purchase price. The seller is also able to claim the GST paid on expenses related to the property.
In cases where the purchased house is to be used as a primary place of residence, a partial GST rebate can be applied. The bottom line is that GST is applicable to every new home sale.
The area most people find confusing is that of renovated buildings and the applicable GST rules.
How does the CRA interpret renovation as it applies to buildings and GST? When a house has been renovated such that it looks new, what GST rule is applicable?
This blog post will try to give answers to all these questions.
We'd start off by trying to get a clear understanding of how the CRA determines the status of a house (new or old) as regards GST payment. And to do that, we'd first have to dissect and understand the meaning of a key phrase that holds all the answers we need - substantial renovation.
What is Substantial Renovation?
A residential complex that has been substantially renovated is accorded the same GST treatment as a new building.
In this case, a residential complex is defined as a building or parts of a building that's primarily occupied by the individual owner or his/her family members.
So what does it mean to substantially renovate a building?
According to the official website of Canada, “substantial renovation” means:
"The renovation or alteration of a building to such an extent that all or substantially all of the building that existed immediately before the renovation or alteration was begun, other than the foundation, external walls, interior supporting walls, floors, roof and staircases, has been removed or replaced where, after completion of the renovation or alteration, the building is, or forms part of, a residential complex."
The website still goes on to state that:
"Generally, all or substantially all, is interpreted as meaning 90% or more."
Now, that sounds complex. Let me break it down into simpler bits that could be easily understood.
Think of a building made up of a living room, kitchen and five bedrooms. If just one or two of the rooms out of over seven or so rooms in this building is substantially renovated (such that drastic changes are made).
It doesn't matter how expensive this renovation was, the entire house won't be viewed as if it was substantially renovated. And it won't pass as a new house that needs full GST payments - as it doesn't meet the 90% or more clause.
In a similar way, if a tonne of cash was spent to renovate the roof, staircase, external walls and foundation, but much wasn't spent to renovate much of the internal part of the building, the house would still not be seen as substantially renovated. No full GST payments here too.
Apart from the percentage of rooms covered, there are also other "fair and reasonable methods" that can be applied to determine if a building has been substantially renovated. Some of which include square footage renovated, compared to the total available floor space; square footage of wall and floor space renovated, compared to total available wall and floor space; etc.
All of this information is available in an (almost) easy to understand form concerning other scenarios like conversion, mixed-use buildings, guest/granny suites, major additions zee and the likes on the Canadian official site.
Let's Help You
If you're confused about how and if GST is applicable on a property being developed for resale, I would be happy to help. Call 778.801.5789 or email info@bloomaccounting.ca
If an employee worked on a statutory holiday, does he/she receive statutory pay?
The answer is not always, and depends if the employee is eligible.
Statutory Pay Eligibility
In order to qualify for statutory pay rates both of these conditions must be met:
1) Must have been employed for at least 30 days before the statutory holiday; AND
2) Must have worked at least 15 of the 30 days before statutory holiday
For example, a part-time employee who worked less than 15 days out of the 30 days before the holiday and ended up working on the statutory holiday would be paid at normal rates and not qualify for statuatory rates.
How Much is Statutory Pay?
All eligible employees receive an average day's pay regardless if they worked on the statutory holiday. So if they did not work on the statutory day, they receive a day of paid time off.
If an employee worked on the statutory holiday, he/she should receive an average days pay PLUS 1.5 times wages for the day.
For example if Margaret's regular rate is $20 / hour and she met the eligibility requirements above. On Canada Day she worked 8 hours.
Her Statutory Pay is calculated as follows:
$160 (average days pay) Plus $240 (8 hours x $30 ($20 x 1.5)) = $400
Works out to be $50 / hour, or 2.5 Times Regular Pay
The British Columbia Provincial Sales Tax (PST) is a retail sales tax. It is charged on most goods and services that are acquired, purchased or brought into the province of British Columbia.
Formerly called the Social Services Tax (SST), it applies to the purchase of both old and new products or services in BC. If a resident of BC buys or leases taxable goods from outside BC, the PST gets applied (and payable) when it is brought into BC.
In this blog post, we will be explaining how the PST applies to real property contractor within the construction industry in BC. If you are a contractor or subcontractor in the construction industry in BC, this is for you.
When done reading this blog article, you will be well informed on what the PST is all about, how it is applied, and how to go about it.
Before we take a deep dive into the meat and potatoes of this article, let us first define some key terms that relate to the BC PST.
What is Real property?
Real property is a piece of land or anything that is affixed to land, such that it becomes an integral part of that land (real property) afterwards. Typically, this includes structures, buildings and items such as equipment and machinery that are attached to structures and buildings via a means other than their weight.
Who is a Contractor?
According to the BC bulletin for real property contractors, anyone who engages in the supply, fixing or installation of goods that becomes a part of a real property is seen as a contractor.
This definition applies to all subcontractors and contractors alike within the construction industry. The rule of thumb to follow in determining if you are deemed a contractor (that’s duty-bound to pay PST) is a simple one.
If you check any of the boxes below, then you are a contractor:
Supply goods and render installation services on said goods, such that they become part of real property, and…
Supply goods in the line of providing you services to a client, such that it becomes a part of real property. Examples are electricians, plumbers, carpenters, fence builders, roofers, window installers, painters, etc.
Some other examples of contractors who are duty-bound to pay PST in BC are:
Excavators
Foundation contractors
Kitchen installers
Heating system installers
Sheet metal contractors
Siding contractors
Sundeck builders
And much more…
How Does PST Apply To Contractors?
As a contractor or subcontractor, in the course of rendering your services to clients, you are viewed as the end user of the materials being used to fulfil the contract. As a result of this, you are to pay the PST on such taxable goods - and NOT charge your client PST.
You are also mandated to pay PST on taxable goods acquired and used for fulfilling contracts on real properties that are outside of BC.
When Do you Collect PST?
There are specific scenarios where you are not the end user and must collect PST on taxable goods. Listed below are some of those scenarios:
If you install goods that do not become an integral part of real property. An example of this is supplying and installing a potted plant for a client in his building or structure.
If you are a contractor, who sells goods without installation services, that is, you run a retail or wholesale facility that solely focuses on the resale of concerned goods.
How to Pay PST
You can remit the PST you owe, as well as those charged to clients, to the government through either of the following means:
You can use any of the channels listed above to remit your PST to the government if your business has $1.5 million or less in total Canadian lease and sales volume for the year in view.
For sales volume above that, the payment must be made electronically.
The T5018 is an annual information return that is used by the Canada Revenue Agency (CRA) to stop or mitigate underground economic activities within the construction industry in Canada.
Who Files a T5018 Slip?
The T5018 information return is to be filed by any corporation, partnership, trust or individual, that has construction as its source of primary business income. If your business generates more than 50% of its business income through construction activities, then you are required to file a T5018 information return.
Additionally, in a year, if you have made payments for construction services above $500 to subcontractors (or received credits from them), then you are also mandated to fill the T5018 slip.
Process for Filing an Information Return Slip
Residency status determines the specific information slip that’s to be completed.
Subcontractors who are residents of Canada are required to report contract payments on a Contract Payment Information Return. This information return consists of a T5018 slip and summary, and it covers construction services executed within and outside of Canada.
Subcontractors who are not Canadian residents are to complete the T4A-NR information return, which includes a T4A-NR summary and slip.
Regardless ofthe information slip you are to file, it can be done either by yourself or your accountant on the CRA website. It can be done via the My Business Account portal or Represent a Client portal respectively.You can file as many slips as needed via these portals on the CRA site.
When Are You to File the T5018 Return Information?
You can file the T5018 on a fiscal-year basis, or calendar-year basis. Regardless of the reporting cycle you choose, the return is due six months post the reporting period.
If you want to make changes to your current reporting period, you will need approval from the CRA.
Should your business stop operating, you are required to file the information return within 30 days post-closure of the business.
What Are the Penalties for Not Filing Your T5018 Return Information?
There are strict penalties for late submission or failure to submit your return information after the expiration of the reporting period.
Each slip is counted as separate information return, and the CRA will penalize you based on the number of slips submitted late - or not submitted at all. The number of late days is used to calculate the penalty fee.
Interest will continue to accrue on the penalty sum until it is paid in full.
Additionally, any contractor that cooperate with a subcontractor to conceal financials, to avoid taxes, could face criminal charges. They could also be penalized with fines up to 200% of the taxes they tried to evade.
Conclusion
The T5018 is the primary means the Canada Revenue Agency (CRA) uses to track financial activity between employers and subcontractors to ensure that all earnings and taxes are paid correctly and on time.
If you need help with filing T5018 forms, feel free to contact us at 778.801.5789 or email to jluk@bloomaccounting.ca
If you are a business in BC, you may have received a notice to register for the Employer Health Tax by May 15, 2019.
First off this only applies to businesses with $500K gross annual payroll or more in the last calendar year.
If you run multiple businesses, note that the $500K threshold is shared amongst associated businesses.
How to Register?
To Register: Visit the Etax BC log in page (same page you would log in to file PST) and you will find a link to register for Employer Health Tax.
How Much is the Tax?
For every $1 above $500K, expect to pay 2.925% up to payroll of $1.5mil.
For every $1 above $1.5M, expect to pay 1.95%
Much like corporate tax, installments are required to be made if EHT is more than $2925.
In other words, if you have more than $600K in gross annual payroll, you will need to make quarterly installments.
Knowify gives contractors construction software to handle job costing, contracts, estimates, job management, service tickets, time tracking, scheduling, invoicing, and billing. Knowify can help any commercial or residential contractor manage and grow their business. PLUS! It integrates with QuickBooks Online.
We recently put two cloud based contractor software to the test; Knowify vs. Co Construct.
How did both score?
What were the strengths and weaknesses?
Ready?
Lets Begin.....
Our Rating:
We scored Knowify at 8 / 10 and Co Construct 7 / 10 Based on the following factors
Proposals
Knowify definitely scored higher on the this feature. Proposals can be generated and sent out for E-signatures in Knowify vs. Proposals are generated in Co-Construct and exported to a word document. The ability to create, send and track proposals within one platform streamlines the contract process and ensures that all contracts are signed and found in one spot.
Invoicing
Knowify again scored higher with the ability to invoice within the software. Co construct does not have this feature at all.
We found it imperative for our clients to know total committed contract values, billed portion and unbilled portions in the pipeline in real time, and Knowify does the job. Both the invoices and payments are synced between Knowify and Quickbooks vs. Co Contract, no invoice, however payments are synced with Quickbooks.
Budgeting
Co-Construct won this feature over Knowify. We found it helpful to template job budgets and able to expand on each phase of a job and budget for both materials, multiple subcontractors, freight, and misc. supplies.
Change Orders
Both software creates change orders and sends out to client for electronic approval. Nice!
Again, Co-construct does not have an invoicing feature, so it would be imperative to ensure your Accounting team invoices the change order after its been approved. Where as Knowify will track the approved invoice as an unbilled portion of the change order.
However if your change order is an addition of an entire scope which requires additional budgeting, Co-Construct would be the software we recommend as Co-constructs's budgeting feature is more detailed and flexible compared to Knowify.
Job Costing
With Co-Construct, scopes can be templated and cost accounts assigned to each product / item.
With Knowify, same costing can be templated and is done through the Plan & Track module, however, lacks the ability to assign multiple sub contractors to each phase and for that reason Co-Construct wins slightly here.
