First home buyer incentives update
Recognising the difficulties for first home buyers, State and Federal governments have introduced a broad range of grants and stamp duty concessions to help ease that all important purchase.
To assist first home buyers, and in some cases other home buyers, many state governments have established financial assistance schemes for households that meet specific eligibility criteria, based on their income and current savings.
These schemes go beyond just offering the first home owners one-off assistance in the form of a grant. Instead the focus is on long-term support that can be offered to a household where they can show capacity to service a loan for a home over the long term.
Summarized below are the grants and concessions by State / Territory. Always double check the concessions are still applicable when you’re making your purchase as the requirement can change with little notice.
Incentives for home buyers
Several states run schemes to assist first home buyers through a specialised home loan product. Some also have schemes available for any home buyer that meets certain criteria.
The schemes generally offer access to a housing loan that has more favourable lending criteria such as a lower deposit (generally two per cent), reduced insurance costs and reduced fees.
The product is offered by the state government or a state government owned entity. The available schemes include Home Start Finance in South Australia, KeyStart’s Standard Home Loan in Western Australia and the Housing Finance Loan in Queensland.
The ACT offers an alternative approach with a scheme called Land Rent for private housing purchases to anyone that meets the eligibility criteria. This is a version of a shared equity scheme where the purchaser pays rent (being significantly reduced land rates) for the land component and borrows sufficient funds for the construction of a new home in the normal way.
Incentives for public housing tenants
Across the country there are several schemes available to assist public housing tenants to purchase either the home they are in, or another public housing home. The loan product is similar to those available for private home buyers with low deposit requirements and reduced mortgage insurance and fees.
These schemes include the State Housing Loan in Queensland, the Streets Ahead Incentive Program in Tasmania and the Home Buyer Incentive in the Northern Territory.
Shared equity schemes for public housing tenants
Shared equity is a variation on the public housing theme. Offered by state governments, shared equity arrangements seek to support a home buyer by reducing the upfront amount they need to borrow. This is generally reduced to around 70 per cent of the house and land price, with the government retaining ownership of the remaining 30 per cent.
This option is available in several states for public housing tenants. There are varied timeframes and options for an owner to buy the remaining 30 per cent equity over time.
Again this type of loan follows the trend of being a low deposit loan for the lower amount, with reduced fees and mortgage insurance requirements.
The schemes on offer include the Pathway Shared Equity Loan in Queensland, the Shared Equity Scheme in the ACT, HomeShare in Tasmania, the HomeStart Shared Equity Loan in South Australia and the KeyStart SharedStart Home Loan in Western Australia.
Grants and concessions
First Home Owner Grant
For most of the last decade the First Home Owner Grant has been available for the construction of a new home in all states and territories. The amount varies between states, and the value of the home eligible for the rebate also varies. There are no income imitations to the grant.
Currently the First Home Owner Grant ranges from $7,000 in the ACT, up to $20,000 in Tasmania and regional Victoria and $26,000 in the Northern Territory.
Stamp duty concessions
Stamp duty (or transfer duty) applies to buying both new homes and existing homes. The majority of states offer a concession or an exemption for the payment of stamp duty to the first home buyers. These concessions apply for both new and existing homes in most states, but are limited to existing homes in the Northern Territory and new homes in the ACT.
When combined these incentives can provide valuable support for low and moderate income households to buy their first home. Having a secure place to call home through home ownership remains a fundamental part of the fabric of Australian society.
First Home Super Saver Scheme (Australia-wide)
If you’re still working towards that first home deposit, give some serious thought to the First Home Super Saver Scheme. The nationwide scheme, is set to help thousands of young Australian residents fast-track their savings by allowing them to make additional super contributions.
How it works: For those who are yet to take their first step on the property ladder, there is an opportunity to make additional super contributions of up to $15,000 annually by sacrificing a portion of their salary. As soon as you have 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, Mozo.com.au calculated that an Australian resident 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.
Note that the grants and schemes undergo regular changes, therefore always check the latest information relevant to the State or Territory of your focus. A good mortgage broker should also be across the latest changes, and if they’re not . . .move on to one that can really help you.
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Debra Beck-Mewing is the CEO of Crave Property Advisory, and has more than 20 years’ experience in property investing, Australia-wide. She has used a range of strategies to build her property portfolio including renovating, granny flats, sub-division and development. Debra is skilled in identifying development opportunities, and sourcing properties that have multiple uses and multiple exit strategies. She is a Qualified Property Investment Advisor, licensed real estate agent and also holds a Bachelor of Commerce and Master of Business.
Disclaimer – This information is of a general nature only and does not constitute professional advice. We strongly recommend you seek your own professional advice in relation to your particular circumstances.