Grants and concessions for first home buyers

Australia has a series of grants and concessions aimed at alleviating some of the financial pressure that comes with buying your first home. Buying a property is no easy feat here, with property prices being high in many cities and regions. This article will introduce you to the schemes that can help you with the purchasing or constructing of your first home.

Most of the existing schemes are aimed at those intending to be owner-occupiers, rather than investors. This means that the property you buy is the one you will live in. Of course, after a period of time you may wish to move houses and turn your initial home into an investment property.

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First Home Owner Grant

The First Home Owner Grant (FHOG) is a nation-wide, state-administered grant offered to first home buyers to alleviate the impact of GST on home ownership. It can go towards covering your deposit, but you’ll usually also need to have further savings. If your savings paired with the FHOG aren’t enough for a deposit, you could look into getting a guarantor home loan.

Who is eligible for the First Home Owner Grant?

The eligibility requirements for the First Home Owner Grant varies slightly between the states. Some of the common criteria includes:

• You must be buying or building your first home
• The home must be newly built and never lived in
• You must be at least 18 years of age and be an Australian citizen or permanent resident
• The home must be intended to be your principal place of residence
• You must move into the home within 1 year of purchasing and live there for at least 6 months
• Property value thresholds limit eligibility ($750,000 cap in most states)

Check the requirements specific to your state/territory to know whether you’re eligible for a grant.

How much is the First Home Owner Grant?

The size of the grant varies between states and territories:

• ACT: FHOG scheme no longer available from 1 July 2019. It was replaced with greater stamp duty exemptions and concessions.
• NSW: $10,000
• NT: $10,000
• QLD: $15,000
• SA: $15,000
• TAS: $20,000
• VIC: $10,000 or $20,000 for homes built in regional Victoria
• WA: $10,000

First Home Loan Deposit Scheme

The First Home Loan Deposit Scheme (FHLDS) is a national government scheme aimed at getting low to middle income first home buyers into the market. With the scheme, some first home buyers are able to purchase a home with as low as a 5% deposit and avoid paying Lenders Mortgage Insurance (LMI).

In February 2021, the Federal Government announced that they would be reissuing approximately 1800 First Home Loan Deposit Scheme guarantees from the 2019-2020 financial year.

It's important to note that if you purchase a home with a low deposit, you'll likely take longer to pay off your mortgage and therefore spend more in interest overall.

Who is eligible for the First Home Loan Deposit Scheme?

To be eligible for the FHLDS, you must fulfil the following criteria, in addition to being a first home buyer:

• Be an Australian citizen who is at least 18 years of age (permanent residents aren’t eligible)
• Singles: with a taxable income of max $125,000 per year
• Couples: with a taxable income of max $200,000 per year (n.b. Couples must be married or in a de facto relationship)
• Be purchasing an existing property, house and land package, vacant land with the intention of building a home, or an off-the-plan property purchase (i.e. house, unit or townhouse)
• Applicants need to have a deposit between 5%-20% of the property’s value
• The home loan must require Principal and Interest repayments
• FHLDS is for those intending to be owner-occupiers, not for property investors

FHLDS property price thresholds

In addition to income criteria, first home buyers must also purchase a property that is within the limits set out by their state or territory. See the table below for details:

Stamp duty

Other than the deposit, stamp duty, otherwise known as transfer duty, is usually the largest upfront cost associated with buying a property. Stamp duty is a one-off fee you pay to the government when you buy land or property. It is a state-regulated tax that you must pay for each property you purchase. Luckily, many states in Australia have stamp duty concession or exemption schemes available to first home buyers and other purchasers.

Find out how stamp duty works in your state or territory:

• New South Wales
• Queensland
• Victoria
• Western Australia
• South Australia
• Tasmania
• Australian Capital Territory
• Northern Territory

How much does stamp duty cost?

The cost of stamp duty in Australia varies between the states and territories. Stamp duty is calculated considering the following factors:

• Property location (state/territory)
• Property type (e.g. investment, owner-occupied/residential property, house, unit or commercial)
• Property value or sale cost (whichever is higher)
• Whether you are a first home buyer
• Whether you are a foreign buyer

Unless you are exempt from paying stamp duty or are eligible for concessions, it can be a major expense. For example, let’s say you are in NSW, moving into your second home that you’ve just purchased for $800,000. If this is an established home (i.e. not newly built), you’d pay about $31,000 in stamp duty costs.

On the other hand, if you are a first time home buyer purchasing a $300,000 empty lot of land in NSW, you’d be fully exempt from paying stamp duty. You would also be eligible for a $10,000 First Home Grant.

As you can see, stamp duty costs can range substantially. It’s important to establish how stamp duty works in your state or territory to understand how much you could be charged. Determine how much stamp duty you could be charged with our calculator here.

Stamp duty concessions and exemptions for first home buyers

Several Australian states and territories offer concessions and exemptions on stamp duty for first home buyers. These participating states will give first home buyers concessions or full exemptions if they are purchasing an owner-occupied home valued under a certain threshold.

For example, in Queensland eligible first home buyers can apply for a transfer duty concession if their home is valued below $550,000.

Some states (e.g. Northern Territory) don’t have stamp duty concessions in place specifically for first home buyers. However, you may still be eligible for other concessions. In the Northern Territory, for example, there is a concession available for all home buyers so long as the property will be their principal place of residence.

HomeBuilder Scheme

The HomeBuilder Scheme is not exclusive to first home buyers, but it can be useful if you intend to build a home. It is a $25,000 grant on offer to homeowners who want to renovate or construct a new home.

It was initially launched as part of Australia’s COVID-19 recovery package, applying to building contracts entered into up until the 31st of December 2020. It has since been extended, in a modified version, until 31 March 2021. The grant amount of the modified version is $15,000.

In all states except New South Wales and Victoria, there is a $750,000 property value cap. In NSW, the cap is now at $950,000 and $850,000 for Victoria (as part of the modified package). If you entered into a building contract in November 2020, for example, and didn’t apply for the HomeBuilder grant, you can still apply for it retrospectively.

There are a few conditions associated with the HomeBuilder grant:

• You need to intend on spending over $150,000 on a renovation
• Be a current or prospective owner-occupier as the grant is not available to investors
• If you are renovating your existing home, the property must be valued below $1.5 million
• For those building a new home, the property must be valued below $750,000
• For renovations, the renovation should improve the property’s accessibility, livability and safety. It can’t be used for additions not associated with the main residence (e.g. no new shed, granny flat or swimming pool)
• Singles must have earned up to $125,000 based on their previous tax return
• Couples are eligible if their combined income is less than $200,000.

Can you qualify for multiple first home buyer schemes at the same time?

Yes, in general you can apply and qualify for multiple first home buyer assistance schemes. However, you may not be eligible for all of the available schemes due to property price caps and other factors.

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The information in this post is general in nature and should not be considered personal or financial advice. You should always seek professional advice or assistance before making any financial decisions.