Published 7 September 2026 · By Jatin Dua, Broker of Record, RE/MAX Quantum Realty
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Get My Free Estimate →Two federal rules make assignments far more expensive than most sellers expect. First, since 7 May 2022, GST/HST applies to the entire assignment price on assignments of newly constructed or substantially renovated residential housing — including any deposit recovered from the original builder, whether or not it is itemised separately in the assignment agreement.
Second, the residential property flipping rule applies to dispositions on or after 1 January 2023: a housing unit owned for fewer than 365 consecutive days generally produces fully taxable business income rather than a capital gain, and the principal residence exemption is denied, unless a listed life event applies.
What an assignment is
An assignment is the sale of a contract, not of a property. The original buyer transfers their rights and obligations under a pre-construction agreement of purchase and sale to a new buyer, who then closes with the builder. The unit itself may not be finished, or may not exist.
The HST rule that catches people
Since 7 May 2022, all assignment sales of newly constructed or substantially renovated residential housing are taxable for GST/HST. The critical detail is the base:
Work through the arithmetic before you agree to anything. On an assignment where the original buyer recovers a substantial deposit plus an uplift, the taxable base is the whole amount, not just the profit.
The income tax question
There are two separate issues.
Business income versus capital gain
The CRA has long taken the position that profits on many assignment transactions are business income rather than capital gains, based on the intention at the time of purchase and the pattern of the taxpayer’s activity. Business income is fully included in taxable income; a capital gain is included at 50%.
The residential property flipping rule
For dispositions on or after 1 January 2023, a housing unit owned for fewer than 365 consecutive days produces deemed business income, fully taxable, with the principal residence exemption denied. The listed exceptions cover genuine life events:
- Death of the taxpayer or a related person
- A related person joining the household, or the taxpayer joining a related person’s household
- Breakdown of a marriage or common-law partnership
- A threat to personal safety
- Serious disability or illness
- An eligible work relocation of more than 40 kilometres
- Involuntary termination of employment
- Insolvency
- Involuntary disposition, such as destruction or expropriation
Note that the capital gains inclusion rate itself did not change — the proposal to raise it to two thirds was cancelled on 21 March 2025 and the rate remains 50%. But that only matters if your gain is a capital gain in the first place.
The contractual obstacles
Before any of the tax analysis matters, check whether you can assign at all. Most builder agreements:
- Prohibit assignment without the builder’s written consent
- Charge an assignment fee, sometimes a substantial one
- Restrict or prohibit public marketing of the assignment
- Reserve discretion to refuse
If your plan depends on assigning, verify the terms before you sign the original agreement, inside the 10-day rescission window.
Why assignments are harder in the current market
Assignments work when values have risen since the original purchase. In Q1 2026 the GTHA new condominium market recorded 246 sales, down 52% year over year, with a record 4,295 completed unsold units, and resale pricing about 25% below the early-2022 peak. In that environment, an assignor is frequently trying to sell a contract priced above what a completed unit costs today.
The practical takeaway
Model the assignment with your accountant before you list it, not after you have a buyer. Three numbers decide whether the transaction makes sense: HST on the entire assignment price, the income tax treatment of the profit, and the builder’s assignment fee. In the current market it is entirely possible for all three to combine into a loss on a transaction that looks like a gain on the face of the agreement.
Frequently asked questions
Is HST payable on an assignment sale in Ontario?
Yes. Since 7 May 2022, all assignments of newly constructed or substantially renovated residential housing are taxable for GST/HST, and the tax applies to the entire assignment price, including any deposit recovered from the original builder, whether or not it is separately itemised.
Does the deposit I get back count as taxable?
Under the CRA’s guidance the tax applies to the entire assignment price including the deposit portion. Structuring an agreement to separate the deposit does not change the treatment. Confirm the specifics with your accountant before you sign.
What is the residential property flipping rule?
For dispositions on or after 1 January 2023, if you owned a housing unit for fewer than 365 consecutive days, the gain is deemed fully taxable business income rather than a capital gain, and the principal residence exemption is denied. Exceptions apply for listed life events including death, disability, separation, the birth of a child, a threat to personal safety, a work relocation of more than 40 kilometres, insolvency and involuntary disposition.
Does the flipping rule apply to assignments?
The flipping rule addresses the disposition of a housing unit. Assignment of a purchase agreement raises its own questions about whether the profit is income or capital, and the CRA has long treated many assignment profits as business income regardless of holding period. Get accounting advice specific to your situation before you assign.
Can I always assign my pre-construction contract?
No. Most builder agreements restrict assignment, require the builder’s written consent, and charge an assignment fee. Some prohibit marketing the assignment publicly. Read the agreement — and if you are relying on being able to assign, verify that before you sign, not after.
Who pays the HST on an assignment?
That depends on how the assignment agreement allocates it, and it is one of the most negotiated points in these transactions. Whoever bears it, the amount is significant and must be worked out with tax advice on both sides before the agreement is signed.
Thinking about buying or selling at the top end?
Send me the address, or the shortlist you are considering. I will tell you what the property is actually worth today, what the land is worth without the house, what the transfer tax and carrying costs will be, and whether the deal makes sense. Confidential, always.
connect@jatindua.com · 437-987-1925 · Book a free consultation
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Related reading
- Pre-construction luxury condos: the risks nobody puts in the brochure
- Capital gains on a luxury home in Canada: where things stand in 2026
- Closing costs on a $5 million Toronto home: the full line-by-line
- The Toronto luxury condo market in 2026: two markets in one city
Sources
Everything above that is a rule, a rate or a published number comes from these. Verify anything that matters to your own deal.
- Canada Revenue Agency — GST/HST and assignments of new housing (GI-120)
- Department of Finance Canada — First-Time Home Buyers’ GST rebate
- Real Estate Magazine — Q1 2026 condominium market (Urbanation data)
About the author — Jatin Dua, Broker of Record
I’m the Broker of Record at RE/MAX Quantum Realty, 799 The Queensway in Etobicoke, and I work with buyers, sellers and investors across Toronto and the west GTA. A large part of my work sits in the upper end of the market, where the comparables are thin, the rules are heavier and the cost of a wrong number is measured in hundreds of thousands of dollars.
The free estimators on this site are mine. I built them because the first question every owner asks is “what is it worth?” and the honest answer starts with a number you can check yourself. connect@jatindua.com or 437-987-1925.