First Home Buyers Grant and Stamp Duty in Australia- Why You Should Take Advantage of The Scheme
Buying your first home can be one of the most stressful and exhilarating moments of your life. First and foremost, property in Australia can be expensive. Secondly, there are many cost heads involved and if you lack the right information, it can be hard to know where to start. For instance, you must pay a local tax on top of the tax on purchase price also referred to as stamp duty. But with the Australian government showing some commitment to improving housing affordability across all its states, owning a house is now easy. This is by offering First Home Buyers Grant available to first home buyers and stamp-duty exemptions/concessions. However, the rules and regulations that apply to this vary from state to state. Thus, it is important to know how things work in the area you will be buying your first home. To help you, we have put together a useful guide for each state.
The First Home Buyers Grant
Australian government recognizes how difficult it is for first home buyers to get into the housing market. Therefore, every state government provides first-time home buyers with incentives like the First Home Owners Grant (FHOG). The FHOG is thus one of the best and most effective ways of assisting families to get a start with a new home. Though welcoming, you need to keep in mind that these grants will not buy you a house unless you have substantial savings. What’s more, how much grant you are entitled to varies across the different states. So, keep on reading to find out the FHOG for the different states in Australia.
Whether you are buying or building your first new home that is valued up to $750,000, you may be eligible for a First Home Buyers Grant. If the home you’re buying is in regional Victoria, you will receive $20,000. This amount will apply for contracts signed as from 1st July 2017 and no later than 30th June 2020. This means in case you’re entitled to the FHOG but you sign a contract for a first home in Victoria before 1st July 2017, you don’t qualify for the $20,000.
New South Wales
A $10,000 grant is available for first home buyers in New South Wales. However, the value of the new home should not exceed $600,000 and $750,000 for building. This applies to anyone with an eligible transaction taking place after 1st January 2016. But for eligible transactions conducted between 1 October 2012 and 31 December 2015, the grant should be $15,000.
The Queensland government works differently. First home buyers will be receiving $20,000 grant amount. The payment is available until midnight from 1st of July 2017. After this, it will revert to the original amount of $15,000. This is meant to help first home buyers get into their new home sooner. However, the new home should be under $750,000. In a situation, you buy an existing home, you will not receive the First Home Buyers Grant even if it’s your first home to own.
Thinking of building or purchasing a new home in Western Australia? If the property value is of up to $750,000, you should apply for the $10,000 one-off first home owners grant. The scheme will be in effect starting from 1st July 2017 and includes homes or newly built homes that have not been occupied previously. But in case you entered a contract to buy or construct a new home between 1st January and 30th June 2017, you are entitled to $15,000 grant.
Previously the Tasmanian government offered $10,000 grant to first Home Owners. But this has changed with the government offering $20,000 starting from 01 January to 30 June 2017. Thus, in case you got a $10,000 FHOG between 1st January 2016 and now, you are entitled to another $10,000 grant. The government further extended the $20,000 grant period from 1st July 2017 to 30th June 2018. From there on, the First Home Buyers Grant may reduce to $10,000 unless the government extends the deadline again. Above all, there is no limit on the purchase price of the home.
First home buyers now looking to build their own home can apply for the $15,000 grant amount in South Australia. This commenced on 14th October 2012. The First Home Buyers Grant applies to the construction or purchase of a new residential property whether it is a townhouse, flat, apartment or unit that meets the local planning standards in South Australia. The property however should not exceed $575,000.
With a welcoming grant of up to $26,000, residents in this state can now build their own first homes. The home can have any value as long it was bought or built as of 1st January 2015 or later. On top of this, homeowners will receive up to $2,000 household goods grants.
The First Home Buyers Stamp Duty
When you buy property in Australia, you are required to pay a local tax which is a component of the stamp duty in addition to the purchase price. This is usually the percentage of the purchase price or market value of the property. So, the more expensive the house is, the higher rate of tax you’ll be needed to pay. Thus, stamp duty can be an obstacle for first home owners. So, in a move to improve housing affordability in Australia, different states have abolished and reduced stamp duty fees. But foreign investors must pay higher surcharges when buying residential property. The percentage varies depending on the rules of the different states in Australia.
Beginning 1st July 2017, Victoria government will no longer charge first home buyers stamp duty. This is for any new or established residential property worth up to $600,000 value. They will however be required to live at the property for at least a year. But for homes valued between $600,000 and $750,000, homeowners will pay less stamp duty. This applies on a sliding scale. Thus, investors will be required to pay stamp duty on the full value of the property rather than just the land value.
New South Wales
In addition to receiving First Home Buyers Grant, first home buyers will not be required to pay any stamp duty fees from 1st July 2017 for homes worth up-to $650,000. The government will also provide stamp duty discounts for existing and new homes up to $800,000. In addition, first home buyers will skip stamp duty fees on their lenders’ mortgage insurance starting from 1st July 2017. If you happen to take advantage of this change you can save around $24,000.
You will pay no stamp duty as a first home buyer if the property you plan to buy is not more than $500,000. But in the event, you buy a new home valued more than $500,000, you will just have to deal with stamp duty concessions offered on a sliding scale. You can pay concession of between $7,875 and $8,750 to be deducted from duty rate. This applies to contracts entered on or after 1st July 2017.
In case you are thinking of stepping on the property ladder in Western Australia, you will not need to pay any duty fee if your home is valued below $430,000. However, you can expect to pay a stamp duty at a rate of $19.19 for every $100 if the property value exceeds $430,000. On the downside, you will not be entitled to any concession or exemption if the home is priced more than $530,000.
Whilst Tasmanian government does offer first home buyers grant, there are no stamp duty exemptions or even concessions in place for first home owners. The government however does offer other state tax concessions including rebate where a vacant land is built on during the financial year.
Unfortunately, no exemptions are specific to First Home Buyers. But homebuyers purchasing a new or substantially refurbished apartment will now be eligible to receive an off-the-plan stamp duty concession. Thus, you can save up to $21,000. The policy is however capped on residential properties valued at $500,000. The contract to purchase should have been entered from 1st July 2017.
If you enter a contract to buy an established home starting from 24th May 2016, you will qualify for the First Home Owner Discount. The discount is usually a full concession on the initial value of the property which should be $500,000. Consequently, you will end up saving approximately $23,900 on stamp duty. As for homes worth above $650,000 and purchased before 31 December 2016, the stamp duty relief provided can be up to $23,000.
How Do You Qualify for the FHOG and Stamp Duty Exemption/Concession?
The eligibility criteria for first home owners differ a little bit between the seven states. But generally, the eligibility criteria are as follows:
1. First, one of the applicants must be at least 18-years of age.
2. You need to be a first home buyer as a natural person and not as a trust or company.
3. At least one applicant must be an Australian citizen or permanent resident.
4. The applicants should not have claimed the grant or the stamp duty exemption/concession previously.
5. You must occupy the home as a principal place of residence within a year of the purchase or construction of the house. You’re also required to occupy the house for at least six months continuously.
6. All applicants must meet the First Home Buyers Grant eligibility criteria to qualify for the stamp duty relief/concession.
7. Applicants should not have owned a residential property whether it is jointly or separately with the spouse or any other person in any state in Australia before July 2000.
8. You or your spouse, co-purchaser or partner need not to have owned an interest in land previously in Australia that had residence on it before July 2000.
Who said building or buying your dream first home has to be an ordeal experience? Purchasing or building a new home gives you more benefits now than buying an already established property in Australia. You just need to make sure you are eligible for the First Home Buyers Grant and stamp duty concessions/exemptions. No more stiff competition from investors to worry about.