CRA GST/HST Used Residential Property Audit — Montreal CPA Firm Near You: Defending Exempt Status, Change-of-Use, and Rebate Implications

A CRA GST/HST Used Residential Property Audit examines whether the sale or use of a previously occupied residential property was correctly classified as GST/HST-exempt.
Under the Excise Tax Act, most used residential properties are exempt from GST/HST — but CRA aggressively audits these cases because misclassification, renovations, short-term rentals, and change-of-use issues often create hidden tax liabilities.

If CRA believes the home is not truly “used residential property”, they may reclassify it as a new residential complex, triggering GST/HST on fair market value, denial of rebates, and substantial penalties.

Mackisen CPA Montreal specializes in defending used residential property audits by proving prior occupancy, non-builder status, and correct exemption using complete CPA-certified documentation.

Legal Foundation

Excise Tax Act s.123(1) — defines “used residential property,” “residential complex,” and “builder.”
Schedule V, Part I — exemptions for used residential properties.
Excise Tax Act s.165 — GST/HST applies only to taxable supplies; used homes are generally exempt.
Excise Tax Act s.191 — change-of-use rules for new vs used residential complex.
Case law:
• Chella v. Canada — intention and use determine GST outcome.
• Tarnowe — occupancy must be proven.
• Cherniawsky — substantial renovations can create a “new” property.

Learning insight: CRA applies the used-property exemption strictly — the burden of proof is on the taxpayer.

Why CRA Audits Used Residential Property

CRA selects used residential property files when it detects:
• home sold shortly after purchase → suspected flipping
• extensive renovations → possible “new residential complex”
• Airbnb or short-term rental activity
• rental rebates claimed but no tenant occupancy
• “principal residence” claimed but utilities/ID don’t match
• property held by corporation or numbered company
• lack of proof of prior occupancy by seller
• marketing efforts suggesting “builder” or commercial activity

Learning insight: CRA starts with the assumption the sale is taxable unless you prove otherwise.

CRA Used Residential Property Audit Process

1. CRA requests:
   – prior owner occupancy proof
   – utility bills and insurance for previous residents
   – sale and purchase agreements
   – MLS listings (before & after)
   – renovation invoices
   – tenant leases (if rental)
   – zoning & municipal records
   – property tax statements

2. CRA reconstructs the property’s use history.

3. CRA tests whether the home qualifies as used residential property:
   • Was it previously occupied?
   • Was the renovation substantial?
   • Was it used for exempt residential rental?
   • Was there any short-term commercial use?

4. CRA may attempt to classify the property as:
   • new residential complex (GST payable), or
   • builder inventory (GST payable).

5. CRA issues a proposed reassessment.

6. Mackisen CPA prepares a detailed legal-factual rebuttal.

Learning insight: A single renovation or Airbnb period can lead CRA to misclassify the property — unless you present the full truth.

Mackisen CPA’s Used Residential Property Defense Strategy

• prove prior occupancy through utilities, insurance, tax records, and municipal files
• demonstrate the property was not substantially renovated (below the 90% threshold)
• defend against improper builder classification
• isolate short-term rental periods from long-term exempt use
• document residential use with tenant proof, ads, leases
• correct self-assessment only if required (and minimize amounts)
• prepare CPA-certified audit binders with full chronological evidence
• file formal objections and negotiate reductions where CRA overreaches

Learning insight: Used-property audits are won through evidence of occupancy and renovation-scope analysis.

Common CRA Findings

• sale treated as taxable because CRA claims it is a “new residential complex”
• rebate denied due to lack of occupancy
• Airbnb activity → property reclassified as commercial
• substantial renovation incorrectly assumed
• seller treated as a builder due to quick resale
• ITCs denied or reversed
• no documentation showing actual prior use
• change-of-use charges applied improperly

Learning insight: CRA’s findings often rely on assumptions, not facts — your CPA must replace assumptions with proof.

Real-World Results

• A Montreal homeowner avoided a $142,000 GST reassessment after Mackisen CPA proved the home was used residential property, not a new build.
• A triplex seller overturned CRA’s “substantial renovation” claim by providing renovation-percentage matrices and contractor affidavits.
• An investor avoided GST on sale after we documented prior tenant occupancy spanning three years.
• A property with short periods of Airbnb use maintained its exempt status by isolating commercial usage and demonstrating predominant residential purpose.

Learning insight: When the property history is documented properly, CRA must accept the exemption.

SEO Optimization & Educational Value

Primary keywords: GST/HST used residential property audit, CRA real estate audit Montreal, used home GST exemption, Mackisen CPA
Secondary keywords: new residential complex audit, substantial renovation CRA, builder classification audit, GST exempt home sale

Learning insight: Clear, authoritative content strengthens both audit defense and online visibility.

Why Mackisen CPA Montreal

With 35+ years of real estate GST/HST audit-defense expertise, Mackisen CPA Montreal is Québec’s strongest firm for used-property audits. Our bilingual CPAs understand every nuance of CRA’s exemption tests, renovation thresholds, builder rules, and occupancy requirements — and we prepare files that win.

Learning insight: Used-property audits are classification battles — and we specialize in winning them.

Call to Action

If CRA is auditing your used residential property, rebate, or renovation classification, get expert defense immediately.
Contact Mackisen CPA Montreal for complete audit representation.
Phone: 514-276-0808 | Email: info@mackisen.com | Website: mackisen.com

Learning conclusion: A CRA GST/HST Used Residential Property Audit tests occupancy, renovation extent, and classification. Mackisen CPA Montreal proves the property qualifies as exempt, protecting you from unnecessary tax and penalties.