Traway Condominium Management

 

 

 

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The Impact of the Proposed Harmonization of GST and PST on Condominiums in Ontario

Corporations should prepare their owners now for a minimum 5-7% increase in 2010. The Federal Government intends to harmonize the GST and PST effective July 2010 (subject to Parliamentary approval).

The governments position is that vendors and retailers will lower their current prices by an amount equal to the PST and then charge the GST.  In a perfect world, this scenario would increase the cost of your purchases by approximately 5-6%.

Condominium Corporations are a service based industry and many of the services we engage in are currently not subject to GST.  This means that the governments theory regarding the actual increase to consumers is underestimated for those homeowners living in condominiums.  Hydro and gas are not subject to PST.  Increases to those services will be an additional 8% to your current costs.

Your cleaning, management and security costs will be subject to the same increases.  Theoretically, your landscaping and snow removal contractors revise their contracts to decrease their costs by their PST portion and then calculate the new HST tax.  The reality of these contractors actually reducing their contract costs is not realistic, condominiums will bear the brunt of an 8% increase to these contracts also.

In actuality, the only items that will be exempt from the tax increase are your insurance premiums and your water service!

The 2007 inflation rate for Ontario was 2.3% and for 2008 - 2%.  Add these inflationary increases to the new harmonized tax and you have a whopping increase!  Even the most prudent board should expect a minimum increase of 5-7% for 2010.

Another critical factor to preparing for this increase is your Reserve Fund. Reserve Fund studies should be updated as soon as possible as the new tax structure could have an impact on your contribution tables.  Failure to update your Reserve Fund studies could lead to inadequate Reserve Funds.  This article on Reserve Fund Study updates as a result of the PST and GST harmonization by GRG Building Consultants is certainly worth reading. They are of the opinion that updates should only be required for specific circumstances!  A difference of opinion, but still good news indeed!