The federal government has confirmed that they will not be introducing a capital gains tax on primary residences. Minister of Families, Children and Social Development, Ahmed Hussen, has confirmed that a home equity tax is not under consideration by the current government and never has been. He reiterated that such a suggestion was false and has severally been clarified. Currently, Canada extends a full exemption on any capital gains on principal residences.
His statement in parliament comes shortly after several parties attempted to make the case for such a tax. Three weeks ago, a Globe and Mail editorial advised introducing a capital gains tax on principal residences. Though this recommendation came with a caveat requiring an exemption large enough that average homeowners would not be affected, it did set off sharp debate for and against the tax. Another op-ed by the Financial Post followed suit, backing the idea.
Royal Bank of Canada has indicated its support of such a tax to help tame an overheating housing market where low interests are helping to drive up house prices as demand soars.
Bank of Nova Scotia’s chief economist, Jean-Francois Perrault, however differs. Perrault considers any change to this exemption as a potentially significant financial blow to Canadians. He however noted that attention should be paid to those home buyers that were undertaking speculative activity by quickly selling newly acquired homes.
Industry experts like Bob Aaron are also advising those that flip houses and form the habit of moving on to their new homes with untaxed profits to be careful not to run afoul of the CRA. Citing a recent tax case of Hansen v. The Queen, Aaron advised always consulting a good tax professional and being honest with the CRA.
The Toronto Regional Real Estate Board (TRREB) is also against a capital tax gains tax. Even though the tax has not even been proposed, they have expressed their strong disapproval and intention to “shut this idea down before it goes any further”.
Over two-thirds of Canadian households own their own homes. This is often their main asset investment. Many are relying on this investment to fund their retirement. The idea of a capital gains tax here is cause for concern. Conservatives have previously claimed that the Trudeau government has secret plans to introduce a capital gains tax on 50% of profits on the sale of homes. Though these allegations have proven false, the trending topic has given new life to the idea and apprehensions for some Canadians who have been financially hard hit by the pandemic and can ill-afford any new and unplanned effects on their investment.