Assignment Sales: The Two Tax Bills People Forget Until It Is Too Late

Selling a pre-construction contract raises two separate tax questions. Since a 2022 amendment, assignments of new or substantially renovated residential housing are taxable for GST/HST by default, at 13% in Ontario, for agreements entered into after May 6, 2022, although repayment of deposits already paid to the builder is generally not taxed. Separately, the profit is frequently treated as business income rather than a capital gain, so it is fully taxable and the principal residence exemption does not apply.

Last updated: August 2026

13% HST

On the taxable portion, by default since May 2022

Not the deposits

Repayment of deposits is generally not taxed

Business income

Fully taxable, no capital gains treatment, no exemption

Assignment sales are where a lot of people in the GTA discovered, expensively, that a profit is
not the same thing as a gain.

If you bought pre-construction and you are thinking about selling the contract rather than closing
on the unit, there are two separate tax questions and most people only think about one of them.

What an assignment actually is

You are not selling a home. You do not own one yet. You are selling your contract to buy
a home, along with the deposits you have already paid into it.

That distinction is the reason the tax treatment surprises people. A house has one set of rules. A
contract has another.

Diagram of the two tax questions on an Ontario assignment sale: HST applies by default but not to the deposit repayment, and the profit is often business income with no principal residence exemption.

Question one: HST on the assignment

This is the one that catches people, and it changed.

A 2022 federal amendment made assignment sales of new or substantially renovated residential
housing taxable by default. The old question, whether the assignor was in business
or engaged in an adventure in the nature of trade, no longer decides it. Individuals who are plainly
not in the business of trading real estate are caught too.

For assignment agreements entered into after May 6, 2022, HST applies at 13
percent in Ontario on the assignment.

The deposit portion is not the taxable portion, and confusing the two changes the number a lot

Where the assignee repays the assignor the deposits already paid to the builder, that repayment is generally not subject to GST/HST. What is taxable is the rest, which is broadly your profit on the contract. So on an assignment where you paid $100,000 in deposits and are being paid $180,000, the HST is not calculated on the full $180,000. Getting this backwards produces a wildly wrong estimate in either direction, and it is one of the most common errors I see in kitchen table math. The assignor also generally has to be registered for GST/HST and remit it by the normal deadlines, which is an administrative step people do not expect to be theirs.

Question two: income tax on the profit

Separate question, separate answer, and this is where the assumption of a capital gain usually
dies.

Profit on an assignment is frequently treated as business income rather than a
capital gain. That means the whole profit is taxable rather than half of it, and the principal
residence exemption is not available, because you never lived in a contract.

The federal anti-flipping rule reinforces this for residential property disposed of within a short
holding period, with exceptions for genuine life events such as death, separation, a serious illness
or a job relocation.

The arithmetic people do not run

Take an assignment with a $180,000 profit above deposits. Assume HST on the taxable portion, and
assume the profit is business income taxed at your marginal rate rather than a capital gain. The
number you actually keep can be dramatically lower than the number in the assignment agreement. Run
that calculation with an accountant before you agree a price, because you cannot renegotiate
it afterwards.

The practical obstacles nobody mentions

The builder has to consent. Most agreements prohibit assignment without
consent, and builders commonly charge a fee for it. Read your agreement before you plan anything.
Marketing may be restricted. Many builder agreements restrict publicly listing
the assignment, which limits your buyer pool and therefore your price.
The buyer pool is small. An assignment buyer needs cash for your deposits, has
to qualify with the builder, and takes on construction risk. That is a much thinner market than
resale.
The rebate position moves. New housing rebate eligibility depends on who ends
up occupying the home, and that question changes when the contract changes hands.

Worth knowing right now

Ontario’s temporary enhanced HST rebate on new housing runs on agreements entered into between
April 1, 2026 and March 31, 2027. If you are dealing in a pre-construction contract in that window,
who holds the agreement and when it was signed can matter to the rebate position. That is a
question for a lawyer and an accountant on the specific facts, not a generalisation.

This is general information, not tax advice

Assignment taxation involves GST/HST registration and remittance, the characterisation of the ”
profit, the anti-flipping rule and rebate eligibility, all on facts specific to your contract. Get
an accountant and a real estate lawyer involved before you sign an assignment agreement, not after.

Sources: Canada Revenue Agency guidance on the GST/HST treatment of assignment sales following the 2022 amendment to the Excise Tax Act applying to assignment agreements entered into after May 6, 2022, and CRA material on the residential property flipping rule. Ontario Enhanced New Housing Rebate window from CRA GST/HST Notice 346.

Where This Comes From

Written from Canada Revenue Agency guidance on the GST/HST treatment of assignment sales following the 2022 Excise Tax Act amendment, and CRA material on the residential property flipping rule. General information, not tax advice.

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Frequently Asked Questions

Do you pay HST on an assignment sale in Ontario?

Generally yes. Since the 2022 amendment, assignment sales of new or substantially renovated residential housing are taxable by default for agreements entered into after May 6, 2022, at 13 per cent in Ontario. The previous test of whether the assignor was in business no longer determines the outcome.

Is HST charged on the deposits in an assignment?

Generally no. Where the assignee repays the assignor for deposits already paid to the builder, that repayment is generally not subject to GST/HST. The taxable portion is broadly the balance, which is your profit on the contract. Confusing the two produces badly wrong estimates.

Is assignment profit a capital gain?

Frequently not. Profit on an assignment is often treated as business income, meaning the whole amount is taxable rather than half, and the principal residence exemption is unavailable because you never occupied a contract. The federal anti-flipping rule reinforces this for short holding periods, with exceptions for genuine life events.

Can I assign my pre-construction contract without the builder’s permission?

Usually not. Most builder agreements prohibit assignment without consent and many charge a fee for it, and some restrict how the assignment can be marketed. Read your agreement before making any plans, because these terms determine both whether you can assign and what price you can realistically achieve.

Do I need to register for GST/HST to do an assignment?

The assignor generally has to be registered and remit the tax by the normal deadlines. This administrative obligation surprises individual sellers who do not consider themselves to be in business, and it is one of the main reasons to involve an accountant before signing.

Assignment Sales: The Two Tax Bills People Forget Until It Is Too Late

Assignment Sales: The Two Tax Bills People Forget Until It Is Too Late

What an assignment actually is

Question one: HST on the assignment

Question two: income tax on the profit

The practical obstacles nobody mentions

Where This Comes From

Frequently Asked Questions

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