About Us

Scarrow Yurman & Co is an innovative practice with the right mix of professional skills, industry experience, and forward-looking perspective. Exceptional service with a personal touch is the cornerstone of our business. Clients rely on us to keep pace with accounting and tax trends, listen to their needs, and remain innovative in our processes and use of technology—so you always get our best! We typically work with owner-managed businesses in York Region and the GTA whose annual revenues range from $1M to $100M. Some of the industries we serve include:

  • Contracting
  • Legal professionals
  • Manufacturing & distribution
  • Medical and related clinics
  • Registered charities and Not-for-profit Sector
  • Technology
  • Veterinary clinics
Careers
Contact Us
  • Professional Accounting Firm
  • (905) 475-5200
  • [email protected]
syc-logosyc-logosyc-logosyc-logo
  • Services
  • Our Vision
  • Our Team
  • Careers
  • Case Studies
  • Contact Us
  • Blog
CLIENT PORTAL
✕
Tax Free Savings Accounts (TFSA)
November 16, 2016
RRSP Season For The 2016 Taxation Year is Ending Soon!
February 7, 2017

Principal Residence Exemption

Categories
  • CRA
  • Personal tax returns
Tags
  • exemption
  • Residence

The Latest Principal Residence Exemption Rule Affects Every Canadian Homeowner

You’ve sold your home and there’s lots of financial matters on your mind – legal fees, moving expenses, renovations. Well, get ready to add one more thing to the list – reporting the sale of your home on your personal income tax return.

CRA’s new tax reporting rule

On October 3, 2016, Finance Minister Bill Morneau announced a change to Canada Revenue Agency (CRA) reporting requirements for the sale of a “principal residence”. For taxation years ending on or after October 2, 2016, any sale of a principal residence must be reported in the seller’s personal tax return for the year of sale. These changes target foreign investors in an effort to ensure that they abide by current Canadian tax rules – which makes sense. However, the reprocussion is that this new rule will also affect every Canadian homeowner.

Why the new rule

Actually, it’s not exactly a new rule – rather it’s more of a stricter adherance to an existing one. Why do we say that?

For many years, Canadians have benefitted from the Principal Residence Exemption (PRE) when it applies to the sale of their principal residence, while not entirely grasping the full compliance expectation or the full complexity of the PRE rules. The CRA has long had an administrative policy that allowed taxpayers not to report anything on the sale of their principal residence – as long as the entire gain was sheltered by the PRE.  This has led to some confusion and unintentional non-compliance. Some taxpayers were under the impression that, because of the PRE, there was no tax on the sale of any residential property owned by them or their spouse.

However, those days of “report nothing” have come to an end.

What this means for Canadian homeowners

  • Individuals who sell a principal residence at any time during 2016 (even before October 3, 2016) must report the disposition in their 2016 tax return. This is true even if the entire gain is fully protected by the PRE – now you have to prove that it is an exempt gain.
  • Previously for individuals, the reassessment period was three years from the date of the initial notice of assessment, with some exceptions. Now however, if the taxpayer fails to report a disposition of a principal residence, CRA can reassess a taxpayer outside of the normal three year reassessment period. So non-compliance will not get swept under the carpet by the passage of time.
  • If the disposition of the principal residence is not reported on the tax return as required, a late-filing penalty can be imposed @ $100 per month times the number of months late, to a maximum of $8,000.

Please call us any time if you would like to discuss this in further detail. Also, you can read more directly on the CRA website: http://www.cra-arc.gc.ca/gncy/bdgt/2016/qa11-eng.html?from=timeline&isappinstalled=0

Share
35

Related posts

November 9, 2021

WILL AND BENEFICIARY DESIGNATIONS: Are they current?


Read more

annual tax bill

September 28, 2021

CRA COLLECTIONS: Potential Impact on Business


Read more
April 8, 2021

COVID-19 Interest Relief for Personal Taxpayers – But Penalties Still Apply!


Read more
© 2023 Scarrow Yurman & Co | All Rights Reserved

Privacy Policy | Terms of Use

CLIENT PORTAL
  • Professional Accounting Firm
  • (905) 475-5200
  • [email protected]

    Your Name (required)

    Company Name (required)

    Your Email (required)

    Phone Number (required)

    Service Interest (required)

    Comments