Principle Residence Exemption – Reporting of Sale to CRA

Sold Home For Sale Sign in Front of New House

Last week Finance Minister Bill Morneau announced a number of changes in an effort to limit foreign money into Canadian real estate and ensure borrowers can afford the mortgages they want to take on.  One of these includes reporting the sale of residences to the CRA and including any capital gains.

The 3 most discussed changes are:

  • Effective October 17, 2016 there is a stress test used for approving high-ratio mortgages, that will be applied to all new insured mortgages
  • Effective November 30, 2016 new restrictions will be imposed in providing insurance for low-ratio mortgages
  • The launch of consultations regarding lender risk sharing

But I think the 4th item, also effective in 2016, is what everyone selling a home in Canada should be aware of:

  • Previously when selling your principal residence any financial gain was tax-free and it was not necessary to report the income on the sale. Now, the capital gains tax is still waived, but the sale of the primary residence must be reported to the CRA when filing your personal tax return.

You will need to supply to CRA:

  • Date of purchase
  • Proceeds of disposition
  • Description of the property

Why the changes?

  • Ottawa is responding to extensive media reports indicating foreign investors are flipping homes in Canada and falsely claiming the primary residence exemption
  • Ensures families only claim an exemption on one home a year, and the home owners must live in the property
  • Certifies that if an individual was not a resident of Canada in the year they purchased the residence, and they disposed of that property after October 2, 2016, they are not eligible to claim the exemption for that year

This is also a fact and history-gathering move for Ottawa.  Did you sell a cottage during one of the years, and not pay tax on the capital gains, while you were claiming another address as your principle residence? It could be also be a way flagging a possible “lifestyle audit”.

Do you think this change will curtail foreign investment, or homeowners trying to claim more than one property as a personal residence? Or do you have other concerns regarding this change? I’m interested in hearing your thoughts.

You can  connect with me by clicking the contact tab at the bottom of the screen if you are reading this post on the website or you can leave your information in the form of a comment right here on the site.

Until next time,


T5018s – What You Need to Know

21945782_sWell we’re coming up to the 6 month deadline for reporting payments made to subcontractors for construction services for 2012.  Most of my clients report on an annual December 31st basis but those that are incorporated, report based on their year end. The reporting of T5018s is The Contract Payment Reporting System (CPRS) which must be filed with the Canada Revenue Agency (CRA) annually. This system became mandatory in February of 1998. Here is what you need to know.

A subcontractor, according to the CRA, is an individual, partnership, or corporation that provides constructions services.  It doesn’t matter if the individual or company does not have a GST/HST number, or if their revenue is under $30,000.  If the total amount of services supplied is $500 or more per year it must be reported.  If an individual or business does not have a Business Number (BN), which is the same as the GST/HST registration number, then they must supply their Social Insurance Number (SIN).

Read more