Canadian house flippers - do you charge gst on your flip

[Sean Kollee]

Any Canadian renovators care to comment here?

I had a discussion with an accountant about the tax implications of house flipping.  Basically he sent me over a bulletin describing the 90% rule.  It said that if the house is a complete gut, or meets the definition of a substantial renovation, the seller MUST charge 5% GST just as if it was a newly built home.  I have attached the bulletin to this text.

In my market this would mean a likely tax hit to the buyer (well, its actually just going to come out of the sellers proceeds) of 30-40k.  This ruins the economics of many deals.  It would be quite easy to end up sending the government more of the profit than the flipper would keep for himself!  The essence of unfairness here is perhaps the land value of the house is 400k, and the renovated house is 300k.  So the government will collect 20k gst on land that simply has been transferred along with the added value of the flip.  Wouldn't it make sense for the government to only collect gst on the value added component of the project?

So, Canadian flippers, you must exceed this 90% rule often in your projects.  Do you collect gst?  If not, how can you avoid problems with the CRA?