Sigh. It’s true. The changes announced by money minster Bill Morneau yesterday are unlikely to have much of a cooling effect on the market. More diddling around the edges. Another populist swipe at evil Chinese dudes. Some tightening up on qualifying for mortgage insurance. And a consultation process that’ll end up forcing banks to shoulder more of the risk now dumped entirely on taxpayers.
But that’s not the big news.
Buried in the announcement, the background paper, the technical paper and then deep into the CRA website are significant changes to how your Big Brother government will now be policing your family home. Under the guise of whacking foreign buyers – a tiny percentage of whom have been claiming the ‘principal residence’ exemption to avoid capital gains tax – the T2 gang have given the CRA the ability to whack you.
It’s a first in Canadian history. You’ll have to prove your home is your home. If you don’t, the money made on its appreciation will be fully taxable. Starting immediately, you must disclose to the CRA when you bought the property, and describe it. You’re required to reveal on your tax return what you sold it for. To avoid paying tax on your home’s sale proceeds, a Schedule must be filed with your taxes. If you sell the house and don’t report it, the CRA will have the right to assess a penalty of up to $8,000, plus tax you on the gain.
“Like terrorist attacks were used to compromise the privacy and independence of Canadian citizens,” says housing analyst Ross Kay, “it appears the Foreign Buyer myth will be used to compromise the privacy and independence of Canadian citizens even further. The suggestion that homeowners selling or buying their personal residence will be a required to report it on income tax forms sounds innocent, but it’s anything but. Twenty years from now as pressure is put on funding government pensions, having a record of net wealth tied up in the family home could place unexpected challenges upon those looking to retire.
“Anyone who believes today’s suggestion that Canadians are now required to give the government the details on selling the family home is not thinking. The government is using the illegal actions of NON-Canadians as an excuse to monitor Canadians’ retirement finances – not something this country should stand for.”
Whether or not this is a conspiracy to trace all individual wealth, it’s still a pain. More reporting. More complexity. More compliance and enforcement. And you can be sure of more taxation.
Here are the facts:
Well, that’s what we know so far. Doubtless, there will be more. After all, effective today your personal residence is a fully-taxable commodity unless you take specific steps to avoid it. By taking those steps, you’re also providing the government with information never previously gathered. Given that most people have most of their net worth in their real estate, the state’s about to take a giant nuzzle into their intimate financial lives.
Will Canadians accept this? Bill Morneau and his boss think so. After all, they wrapped it in anti-Chinese emotion.
How brilliant was that?