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Switching a property from long-term residential use to short-term rentals, like Airbnb, can lead to significant GST/HST liabilities upon sale due to the change-in-use rule under the Excise Tax Act. If over 90% of the property's use involves short-term stays (less than 28 days), it may be deemed taxable.
For example, in 1351231 Ontario Inc. v. The King, brief short-term rental use triggered an $80,000 HST reassessment.
To avoid unexpected costs, property owners should understand the timing rules, consult tax experts, and consider strategies to reduce liabilities while staying compliant.
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