In response to the consistent growth in the country’s hottest housing markets, the Canada Revenue Agency (CRA) has begun taking steps in ensuring tax compliance, a development that has uncovered various risk factors in the real estate segment.
In a contribution piece for the Financial Post
, Jamie Golombek of the CIBC Wealth Strategies Group in Toronto outlined the compliance risks recently identified by the CRA:
Unreported capital gains on property sales
Golombek noted that taxpayers can correct their tax returns online in case they were not able to report their gains over the past year.
“The CRA also reminds us that if you suspect that someone you know may not have reported income or paid GST/HST on a real estate (or any other) transaction, you can tip them off, anonymously, via the CRA’s National Leads Centre,” Golombek added.
Unreported GST/HST on sales of new/renovated homes
“[The] builder of a new or ‘substantially renovated home’ must charge and collect GST/HST when the home is sold,” Golombek wrote.
The CRA recently found that many property flips are reported incorrectly, or are not even reported at all, for tax purposes. The agency emphasized that profits from flipping are considered as business income, and hence fully taxable.
“While real estate flipping isn’t illegal, the money made on real estate flips, including any real estate commissions and appreciation in value, must be reported to the CRA,” Golombek said.
Questionable sources of funding
Discrepancies between the lifestyles of a growing number of home owners and their reported incomes have led the CRA to identify this development as a pressing issue.
“The [primary] concern identified by the CRA is taxpayers who buy a property with funds that may never have been taxed, whether in Canada or abroad. For example, a large down payment on a home may indicate that the purchaser has unreported income, either earned from legal or illegal sources,” Golombek explained.
Federal government should enforce compliance with anti-laundering laws – observers
Regulator accuses broker of falsifying documents