Home Building Scheme

The news that the government is handing out building and renovation grants is certainly exciting and very welcome news to the industry, however the biggest question we are being asked is ‘Are we eligible for the HomeBuilding grants?’.

The initial eligibility is somewhat clear but in the rush to release the grants, it appears that little consultation has been held with the banks so many are thinking that this will be able to be used to replace the need for a genuine deposit on their new home. The question we are waiting to be answered is how the banks will treat this grant? It is known that the banks, in many cases, will use the first home buyers grant as part of an applicants deposit but this is specifically written into their policies. In the rush to release these new grants, the banks have not yet caught up and at present, the common consensus is that because they are proposed to be paid direct to the applicants ie. out of the banks control, they will not be considered as part of the minimum deposit. If you’re unsure if you have sufficient deposit, we can calculate this for you contact us now.

Now to answer the big question… Am I Eligible?

For The Federal Grant, firstly to summarise what is included:

  • The HomeBuilder grant is available on building contracts signed between 04/06/2020 and 31/12/2020 with construction to begin within 3 months of the contract date.
  • A government grant of $25,000 is payable to eligible homeowners that either build a new home, or substantially renovate an existing home.
  • For new builds, the maximum value cannot exceed $750,000 including the purchase of the land. Please note that owner builders are not eligible and you must have a valid building contract. You also must be building an owner occupied property, investment properties are not eligible. If you already own the land, you can still be eligible as long as the building contract is signed after the 4th of June 2020.
  • For renovators, you must have a building contract for between $150,000 and $750,000 and the maximum value of your home must not exceed $1,500,000. Please note that you MUST use a registered builder and cannot appoint multiple contractors to meet the minimum threshold. The renovations need to “improve the accessibility, liveability and safety” of your home and cannot be used to build things outside of your home like a swimming pool, tennis court or sheds. As with new builds, investment properties are not eligible.

If you tick one of the above boxes, you need to tick the next round of eligibility criteria for the federal grant (see bottom for additional WA state grant eligibility separate to federal):

  • The property must not be owned in a company or a trust
  • You must be an Australian citizen. Permanent residents, temporary resident and New Zealand citizens are not eligible.
  • Earn below the income cap
  • If you are applying for the grant as an individual income on your 2018-2019 tax return must be below $125,000
  • If you are applying as a couple the combined income on your 2018-2019 tax return must be below $200,000. After 1 July 2020 they will base your income from the 2019-2020 tax return.
  • The income limit is based on your gross income before tax, excluding superannuation.
  • The Government has confirmed the income cap is based on ‘your most recent taxable earnings or later’ so prior to June 30 2020, your 2019 notice of assessment will be used to confirm eligibility and after 1st July 2020, your 2020 taxable earnings will be considered.However, if based on your 2019 taxable earnings you believe you were under the cap but based on your 2020 earnings you would be over, you must use your most recent earnings to determine eligibility.
  • You don’t need to be a first home buyer to be eligible but yes, if you are a first home buyer, this grant will be in addition to other grants you are eligible for making it quite an attractive incentive!

 

Now on to the specific lending question – Can I use the Home Building grant as part of my minimum bank deposit?

The short answer is at the moment, it’s likely a no. The main reason is that the banks are not yet in control of the funds and we don’t have a clear time frame of when it will be paid to you even once the grant is approved. We do know that there will be an application process similar to the first home buyers grant via the Office of State Revenue but the application forms, exact process and time frame is yet to be released. There has been little consultation with the banks on how they will treat this but it’s certainly being advertised that it will help home buyers get into the market. In the past, first home buyer boosts have been considered in bank policies so it is our hope that within the next few weeks, we will be able to factor it in.

 

The WA State Home Building Grant:

If you are a WA resident, the McGowan Government has now released the state based building scheme in addition to the federal scheme. You DO NOT need to be eligible for the federal grant to be eligible for the state grant.

The good news here – whilst it only applies to new builds and not renovations, the income caps and property value caps do not apply meaning if you are a higher income earner or going for that dream home, you can still be eligible for the $20,000 boost.

The other piece of good news, this is for owner occupiers AND investors so if you’ve been thinking about getting into the market or building your portfolio, you stand to benefit either way.

Homebuyers who purchase a property in a singlestorey development which is already under construction eg. Villas, may also apply for the grant.

In addition, as part of its new package, the Government will also extend a 75% stamp duty rebate for off the plan apartments up to a maximum of $25,000 and it will include apartment projects currently under construction.

Like with the federal grant, it will be administered via the state revenue department and whilst we can assist you to apply for the grant, it is unclear when it will be paid (land settlement, slab down, end of build) meaning the banks are unlikely to consider it as part of your minimum deposit. We are hoping to hear from our lenders to better understand how it will be treated once we have a clear understanding on the application and payment process.

 

Overall, we are thrilled to see this boost to the sector and there is certainly a lot of interest indicating it will be an initial success. We’re looking forward to the results and hopefully very soon seeing the banks accept this as part of an acceptable deposit to truly benefit home owners.

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