This article has been withdrawnThe version published here in March 2023 set out the tax treatment of assignment sales as it stood before two federal changes. We have taken the guidance down rather than update it. What follows describes the changes and the questions they raise. It is not tax advice, and nothing here is a substitute for an accountant who can see your agreement.

What the old article got wrong

It opened by saying that tax on an assignment depends on the assignor's intent — taxable if you meant to sell your interest, generally exempt if you meant to live in the unit. That was the correct rule once. It stopped being the rule on 7 May 2022, and the article was published in March 2023.

Its sections on capital gains and the principal residence exemption had the same problem from the opposite direction: they were written as though the residential property flipping rule did not exist, when it had already been in force for nearly three months.

It also gave 11.5 per cent as the rate applied to assignment profit. That is Ontario's general corporate income tax rate. An individual assignor is taxed at personal marginal rates, which are materially higher.

The two changes

GST/HST, from 7 May 2022

Budget 2022 amended the Excise Tax Act so that assignments of newly built or substantially renovated residential housing are taxable for GST/HST. The intent test is gone: it no longer matters whether you originally meant to move in. The amendment also addresses how the deposit portion of the assignment price is treated, which is one of the things that makes the wording of your assignment agreement matter rather than being a formality.

The residential property flipping rule, from 1 January 2023

Profit on a residential property held for fewer than 365 consecutive days is deemed to be business income rather than a capital gain, which also puts the principal residence exemption out of reach. The definition reaches the right to acquire a housing unit, so it applies to assignment sales. There are statutory exceptions for life events — a death, a separation, a job relocation and others — and whether one applies to you is exactly the kind of question to put to an accountant rather than to a real estate brokerage.

What to ask before you sign

These are the points where we have seen assignment sellers get a surprise. None of them are things we can answer for you.

  • How the assignment agreement splits the price between reimbursement of your deposits and your profit, and whether that split is stated in writing.
  • Who is contractually responsible for collecting and remitting the GST/HST, and whether the figure you have agreed is inclusive or exclusive of it.
  • Whether you need to be registered for GST/HST before closing, and by when.
  • How long you will have held the right to acquire the unit at the date of disposition, and whether any statutory exception is available to you.
  • What the builder's consent fee is, and which of your costs — legal fees, the consent fee, the commission — are deductible against the gain.

What we do

We handle the transaction: what your agreement permits, what the builder's consent requires, pricing the position against comparable assignments, and finding the buyer. The tax treatment is your accountant's, and we would rather say so than guess. See how we sell assignments, or send us the project name and your firm date and we will tell you what your agreement permits before quoting a price.

Sources: Department of Finance Canada, Budget 2022 and the resulting Excise Tax Act amendment effective 7 May 2022; Canada Revenue Agency guidance on the residential property flipping rule, effective 1 January 2023. Confirm both against current CRA publications — this page is a record of what changed, not a statement of the law as it stands today.