First home owners grant
As real estate goes off across Australia’s major cities, which in turn lifts prices in the surrounding areas, trying to buy your first property in the current market is hard.
That’s why it’s important to look at all your options as a first home buyer, to see how you can get a foot in the door earlier. And of course one method is to purchase a home that fulfills the requirements of your state or territory's first home owners grant (FHOG).
What is the first home owners grant?
On 1 July 2000 the Howard Government introduced the Goods and Services Tax (GST) in Australia. To offset the roll on effect of this new tax on Aussies buying their first home, the First Home Owner Grant scheme was launched nationally.
While originally the grant that offers a one-off lump sum to first timers was available for established properties, today most states require the property to be a “new” or “substantially” renovated home.
The FHOG differs according to the state or territory you live in with each region having its own criteria that you (and your partner) will need to meet to be eligible for the first home owners grant, such as being over the age of 18 and an Australian citizen or resident.
If you’re still saving for that first home deposit, our snapshot on the First Home Super Scheme near the end of this guide is worth a read. But first, here’s a quick run through of the different FHOG and concession schemes state by state.
So what are we waiting for? Let’s get started!
NSW - First Home Owner Grant (New Homes) scheme:
First home buyers across New South Wales who build or purchase a new home valued at $750,000 or under can receive a juicy lump sum of $15,000 (for transactions* made between 1 October, 2012 and 31 December, 2015) or $10,000 (for transactions made from 1 January, 2016). Keep in mind, you can only access this scheme if you live in your property for a set period of 6 months in the first year.
And from 1 July 2017, if your new or existing first property is under the value of $650,000, you won’t get charged with a hefty NSW stamp duty tax that can run into the tens of thousands. However, if you’re a first home buyer whose new or existing property is worth between $650,000 to $800,000, you’ll qualify for a stamp duty discount instead. First home buyers in NSW also get to skip stamp duty fees on their lenders’ mortgage insurance (from 1 July 2017).
*The transaction date falls on the day you purchase your your new home (or begin building your new home).
Queensland - Great Start Grant:
Queensland offers a slightly more generous grant than its southern neighbours - a $20,000 one off payment for new homes valued at less than $750,000 (between July 1 2016 and June 30 2018). On top of this, there’s also a first home “transfer duty” (previously known as stamp duty in Queensland) concession, which means you will pay no transfer duty on the land if you meet the eligibility requirements. You’ll also need to move into your first home within the first year and live in it for at least 6 months.
Australian Capital Territory - First Home Owner Grant:
Slightly less than NSW and Queensland, Canberrians can enjoy a $7,000 lump sum for new or substantially renovated properties purchased on or after 1 January, 2017 that are valued at $750,000 or less.
There’s a home buyer concession too, where first home buyers who purchase or build a new property are charged ACT stamp dutyat a “concessional” rate. The ACT Government also requires you to live in the property for 12 months.
South Australia - First Home Owner Grant:
If you call South Australia home and are buying a new property as your first home then you’ll receive a lump sum of up to $15,000. If you buy an apartment off the plan, the government may give you a SA stamp duty concession (or a partial concession) too.
Northern Territory - First Home Owner Grant:
New homeowners living in the top end of Australia will be pleased to hear that they can receive plenty more than what first home buyers in the above states get, with a nice grant of up to $26,000 if the home is brand new. The property can have any value and still qualify as grant-worthy if it was purchased in 2015 or later.
While the Northern Territory no longer gives out NT stamp duty concessions, several other incentives have been designed to encourage first home buyers including...
- Household goods grants of up to $2,000
- First homeowner discounts to the value of $23,928.60
- Home renovation grants of up to $10,000
Tasmania - First Home Builder Boost:
Tasmanian first home buyers are entitled to a generous $20,000 lump sum if they meet the requirements of the First Home Builder Boost grant and purchase a new home. That’s based on the condition that they live in the property for at least 6 months and move in within the first 12 months of the home being built. From July 1 2018, the grant amount will fall to $10 000.
Victoria - First Home Owner Grant:
Are you purchasing a property in Victoria valued at less than $750,000? From July, 2017, you could be eligible to receive a $10,000 lump sum and score a discount on your stamp duty. Then again, if the value of your new home is less than $600,000 you’ll not only be given that lump sum payment but have your stamp duty fee waived too. And those who love the country air may be happy to hear that the government will offer $20,000 to any first home buyer building a brand new home in regional Victoria valued up to $750,000 from July, 2017.
Western Australia - First Home Owner Grant:
Western Australia offers a $10,000 grant to first home buyers who purchase or build a new property to live in. But better still, if an eligible contract was made in January, 2017, homeowners qualify for a $5,000 “boost payment”. If you’re thinking of stepping on the property ladder in WA, note that to access the grant you’ll need be an occupant for 6 months in the first year of the house being built.
There’s also a Home Buyers Assistance Account available to first home owners purchasing an older home costing less than $400,000 that provides a grant of up to $2,000 for some of the upfront expenses like pest and building inspection fees, conveyancer fees, and upfront home loan fees.
Still saving? Here’s a snapshot of the First Home Super Saver Scheme
Well that’s a wrap of the first home buyer grants up for grabs in every Australian state. But if you’re still working towards that first home deposit and reading this guide on or after July 1, 2017, give some serious thought to the First Home Super Saver Scheme.
The nationwide scheme, which was introduced by Treasurer Scott Morrison in the 2017 Federal Budget announcement, is set to help thousands of young Aussies fast-track their savings by allowing them to make additional super contributions.
How it works: Aussies yet to take their first step on the property ladder, can make additional super contributions of up to $15,000 annually by sacrificing a portion of their salary. As soon as they’ve made $30,000 worth in contributions (which would take at least two years) via the scheme, they’re required to withdraw the funds from their super fund account for the purpose of including it in a first home deposit. The good news is, that couples are not excluded from the scheme, meaning they can save up individually and pool their money together after withdrawing the funds.
Tax benefits: What makes this scheme so lucrative for first home buyers are the tax benefits, as additional super contributions are taxed at a light 15%. Despite the fact that the Australian Taxation Office applies a tax rate to all funds withdrawn through the scheme as well, which is 30% below the marginal tax rate of the saver, first home buyers still wind up better off than if they’d simply used a high interest savings account for the same purpose.
For instance, we calculated that an Aussie on an $80k salary who makes an additional super contribution of $15k each year, would end up with $25,603 after two years. This is a whopping $5,297 more than what the best savings account at the time of writing could give a saver with a 3.05% interest rate attached.
First home buyer tips
Before you decide that you’ll purchase a property to fulfil your state or territory’s requirements, make sure you follow these top tips:
- 1. Conduct due diligence when buying off the plan. With all states and territories now requiring you to buy a “new” home, the idea of purchasing a yet-to-be-built property has probably crossed your mind. But if you choose the off the plan option make sure you conduct some recon work to ensure the builder in charge of the construction has a good reputation for their past builds.
- 2. Hire a solicitor or conveyancer. Trawling through the fine print of a contract is not only tiresome but could mean you miss some important red flags that a professional would have picked up. So we recommend getting a licensed solicitor or conveyancer to look over the contract for you and help you organise the first home owners grant application paperwork.
- 3. Do your sums. While the first home owners grant can be a tempting offer, make sure you’re not just buying a new home for the freebie offer. Instead, get an idea of the property prices in your area through online websites like realestate.com.au and compare the prices of an older home against a new home with similar features. This will show you if the cost of buying a new property is actually worth the savings you’ll make from first home owners grant and stamp duty concession.
4. Budget for the hidden costs. Ask yourself, “am I in the financial position to afford the cost of a new home?” Apart from higher home loan repayments, you’ll also need to budget for plenty of other charges that include things like upfront and ongoing mortgage fees and home and contents insurance. Read our how much can I borrow guide for a full runthrough of the costs associated with purchasing a home or punch in your numbers into our borrowing calculator for an estimate of how much you could comfortably afford to pay off.
Want more tips on purchasing your first property? Our first home buyers hub has everything you need, to make first home ownership a breeze.