Canada’s Tax Authority Has Been On A Multi-Billion Dollar Real Estate Crackdown!

 

Canadian real estate owners are stuck paying huge penalties after trying to avoid taxes owed.

New data from the Canadian Revenue Agency (CRA) shows their crackdown on real estate

owners/sellers has led to billions in recouped revenue. Data provided by the agency also shows

they’ve collected substantial fines adding up to hundreds of millions, after diving into real estate

transactions. The program is largely focused on Greater Toronto and Vancouver, as a high volume

of red flags were being set off.

 

The CRA has been on a mission to crack down on real estate tax evasion, especially in Ontario and

BC. Red flags they’re looking for include:

 

Property flippers: People who regularly flip property for income without properly disclosing the

funds might get a second look.

 

Unreported capital gains: Sold property and didn’t declare? That’s a problem, even if taxes aren’t

owed.

 

Unreported worldwide income: Have cash coming in from outside of the country? If the CRA finds

hints of it and you haven’t told them where it’s coming from, they might have some questions.

 

Unreported GST/HST on a new or substantially renovated home: Built a new home on a lot and

sold it? You were supposed to collect GST/HST. Ditto in some cases where owners “substantially

renovate” a property before selling it (think gutting it and leaving a shell, probably not just adding

a new kitchen).

 

Lifestyle Assessments: If the owner is rolling in a high value home and there’s a big gap between

income and the payments, the CRA might want a second look.

There are other flags as well since the agency can correlate data, but those are the big ones they

mentioned.

 

Just in Ontario and BC. From April 2015 to March 2022, the CRA’s real estate crackdown produced

$2.2 billion in audit assessments. Included in that amount was $298.9 million in penalties for nonpayment.

The audit assessment values are split into three major categories: Income tax, GST/HST, and GST/

HST New Housing and new residential property rebates. Ontario and BC both showed about $1.1

billion in audit assessments respectively, but for very different reasons.

 

Ontario’s audit assessment included $147.6 million of income tax, and another $332.2 million

GST/HST. Most of the value was in GST/HST New Housing and new residential property rebates,

coming in at $662.9 million for the period.

 

The tax authority says they primarily focus on Greater Toronto and Greater Vancouver. Pricey

real estate combined with high transactional value, and aspiring investors that might not know

the rules are concentrated in these regions. The recent real estate boom and our recent dive into

property registry data shows a huge investment surge across the country, perhaps resulting in wider crack downs.