Both the Federal and Western Australian governments have announced stimulus packages to help the construction industry through the economic downturn caused by the Coronavirus pandemic. For homeowners, and those looking to buy this is a great incentive to move forward on your renovations or buying that home.
While reading, remember that these grants aren’t exclusive. If you’re eligible, you can apply for both the state and federal grants giving you $45,000 towards your new home. And for first home buyers, you can get these benefits on top of the first home owners grants too.
As always, the devil is in the detail… we’ve heard some people thought they could use these grants either as a deposit, or as an alternative to a deposit for home buying or building. That’s not the case, these grants are paid retrospectively, and you will still need a deposit.
Let’s have a look at what these grants could mean for you.
FEDERAL GOVERNMENT “HOMEBUILDER”
There is a tax-free grant of $25,000 up for grabs, but there are a range of conditions you need to meet. These grants are not available for investment properties, only for owner occupied properties.
Let’s clarify some of the other conditions for eligibility:
All contracts must be signed between 4th June and 31st December 2020.
You must be:
- Over 18
- An Australian citizen
- Applying as a person, not a company or trust
The grant is means tested, so if you’re an individual applicant your income for the 2018/2019 tax year or later must be under $125,000. For a couple, your income must be under $200,000.
I want to build a new home
Then you’ll need to build a home that will be your principal place of residence, and the value of the home must be under $750,000.
I want to renovate my home
There’s a few more rules for renovations:
- Your property cannot exceed a value of $1.5 million, this includes house and land
- The contracted spend must be between $150,000 and $750,000
- Construction must commence on or after 4th June and within three months of the contract date
- Renovations must improve the accessibility, liveability or safety of your home
- Does not include the addition of stand-alone granny flats, pools, spas, tennis courts, sheds etc.
What about apartments?
Those living in apartments can claim for the renovation grant if you meet the above requirements.
If you’re buying a new off-the-plan apartment or town house you can also claim. However, you must sign the contract to buy on or after 4 June 2020 and on or before 31 December 2020 and construction will need to commence on or after 4th June and no later than three months after the contract is signed.
How do I receive the grant?
The grant is paid by the relevant State or Territory authority. Here in WA, the form will soon be available on the wa.gov.au website.
WA “BUILDING BONUS”
Here in WA, there is another grant for those who build that can be claimed on top of the federal government grant. This one is called “Building Bonus” and is a $20,000 grant available to both owner-occupiers and investors who build a new home.
There are two options, enter into a contract to build a new home on vacant land or enter into an off-the-plan contract to purchase a new home as part of a single-tier strata scheme. As per the federal package, the dates for contracts are between 4th June and 31st December 2020.
The existing off-the-plan duty rebate scheme has been extended for the dates above. This includes new units or apartments, in a multi-tiered development that is already under construction.
Unlike the federal package, the state-based grant is available to foreign persons, corporations and trustees. And there is no means testing or limit on the value of the property.
Another difference is that construction can start within six months of entering into the building contract. Note that if you want to apply for the HomeBuilder grant you’ll still need to start construction within three months.
What properties are eligible for the grant?
- New detached homes constructed under a building contract
- New relocatable homes
- New homes constructed by an owner-builder
- New single-tiered homes on strata plans such as villas and townhouses
- New single-tiered homes on other land survey types
FIRST HOME BUYERS
If you’re a first-time home buyer, the grants above are available to you (if you’re eligible) AND you can also take advantage of first home buyer schemes. There are several available, let’s take a closer look.
First Home Loan Deposit Scheme
This will allow you buy a home with a deposit of as little as 5% without paying Lenders Mortgage Insurance (LMI). LMI is usually required if you have a deposit of less than 20% however, under this scheme the government is essentially acting as guarantor on your loan. Not having to pay LMI can save you in interest as this is usually added to your mortgage and you pay interest on the amount borrowed.
Here’s the fine print. In WA, the threshold for borrowing is $400,000 in capital city and regional areas and $300,000 throughout the rest of the state. Income thresholds also apply. If you’re single your income needs to be less than $125,000 and for couples under $200,000. There is a strict determination of couples, this needs to be your married or de-facto partner. Splitting a purchase with your friend, sibling or other relatives means you won’t qualify. The scheme is only open to owner-occupiers and not to investors.
First Home Super Saver Scheme
You’ll need to be making contributions to your super, the contributions from your employer can’t be used for this scheme. The contributions you can make are voluntary and can be before tax (such as salary sacrificing) or after tax (such as using your savings, money from an inheritance or sale of an asset). You can save up to $15,000 per year with an overall saving of $30,000.
Don’t forget to consider the $25,000 limit on concessional contributions.
To be eligible, you’ll need to be over 18, have never owned a property in Australia and not used this scheme previously. The funds can only be used for owner-occupier purposes. You should investigate whether your super fund will allow you to use this scheme before you start saving and talk to them before you start the process of withdrawing your funds.
You’ll need to go through your MyGov site to apply, be sure to look through the information on the ATO website so you’re prepared and know what to expect from the application process.
First home owner grant
Here in WA, there is a $10,000 grant available to for first home buyers who buy or build a residential property as their primary place of residence. Generally the grant is applied for and received by your agent, assuming they are an approved agent.
To qualify, you need to be over 18 and have never received this grant or owned a property. There is no means testing for this grant so you can apply regardless of your income or assets.
Concessional duty (Stamp Duty)
As a first home buyer, if you purchase a property for less than $430,000 you may be exempt from duty. For homes purchased above that rate but below $530,000 you may qualify for a reduced rate of stamp duty. This only applies to homes, vacant land purchases are exempt.
Assuming you’re ready, and in a position to buy or renovate then now is definitely the time. Contact us if you have any questions or would like clarification.
It is very important that you understand that whether the above information is appropriate or not will depend on what your personal circumstances are. Please consider getting professional advice to ensure that any action you take will meet with your objectives, goals, and financial situation.
Disclaimer: Due to the ever-changing landscape of the Australian financial and taxation system, please seek out advice from a professional before taking this advice into consideration. The above information is general in nature and should not be considered as advice.
