Everything You Need to Know About the Government’s Plan to Help First Home Buyers
Entering the property market for the first time is a commitment and comes with unique challenges beyond deciding on your dream floor plan and location. When you're competing with investors and current owners expanding their portfolio, it doesn't always feel like a level playing field.
Enter: First home buyers benefits.
Governments around Australia introduced schemes and concessions to lower the barriers of entering the property market for the first time to be more achievable. Off-the-plan packages are a favourite of many first-time buyers because of the value they deliver. The Victorian Government recognises this too, and in a drive to offer the most value in these schemes, they provide unique incentives and concessions to make off-the-plan an even more prosperous option.
Like any good incentive, strict rules and changes occur to ensure the funding goes to the intended people, but with multiple schemes regularly changing, staying up to date is a challenge. As a first home buyer, arming yourself with the most up-to-date and informed knowledge on these schemes can help you capitalise on them and get your own place sooner.
First Home Owner Grant (FHOG)
First home buyers building their homes are eligible for the first home owner grant of $10,000 - which essentially acts as a discount for you that investors don't receive. As long as the package price is below the value of $750,000 and you meet the other eligibility criteria explained below, this lump sum can go directly to the cost of building your first home. And if you're building in regional Victoria, this figure jumps up to $20,000.
This scheme doesn't immediately invalidate first home buyers from paying stamp duty, but some exemptions and concessions can eliminate or reduce this cost for eligible candidates.
Who's eligible for FHOG?
Eligibility for the first home buyers’ grant in Vic includes some general and specific criteria to ensure the funding is distributed fairly. But first-home buyers building their own homes have fewer requirements to meet than those buying existing homes.
It can get a little technical and information-heavy, so we'll break the requirements into swallowable sections here. We can also simplify the language - when we state 'you', we refer to you as well as your partner or the other applicants you're buying the property with.
The first set of requirements below is to ensure that participants are actually first-time buyers. You are ineligible if you have already:
- Received the grant in the past
- Owned a property in Australia before 1 July 2000 or lived in a residential property in Australia that you owned after 1 July 2000 for six months or longer. This means you're still eligible if you bought a home after 1 July 2000 but didn't live in it. So, let's say you bought a property that you always rented out; it wasn't your first residential home, so you're in the clear for the first home buyers’ grant.
The opposite is also applicable. You (or one of the applicants) need to live in the home for at least 12 months once construction is completed.
And here are more general eligibility criteria:
- When construction is finished, you and the other joint applicants must be at least 18 years old.
- You or at least one of the joint applicants must be a permanent Australian resident or citizen.
*First Place offers no guarantee around government grants and customer eligibility. For more information on grant eligibility visit https://www.sro.vic.gov.au/first-home-owner. Grant eligibility is processed through SRO, and not First Place.
Stamp Duty (Land Transfer Duty) Concessions
Another way the Victorian government helps first home buyers enter the market is by only charging stamp duty on the land, not the total off-the-plan price package.
Stamp duty is a tax applied to home and land transactions and is a lump sum paid by the buyer. While the duty is applicable for first-time buyers building their own homes, this concession dramatically reduces the value that can be charged against and can translate into huge savings. In the past, investors were also eligible for this concession, but recent changes mean it's now only available to first-home buyers, putting you at an advantage over the competition.
What's the discount for off-the-plan?
When purchasing off-the-plan, it's not as straightforward as separating the land and the construction to determine each value as the total price is offered as a package, so a simple calculation is used.
While you might not have this information available before construction starts, all you need to do is take the cost of construction to build the property off of the total amount you pay to find the value that stamp duty is applicable on after the concession.
So, consider an example where you buy an off-the-plan home for $700,000, and the builders spend $600,000 of the total package price on building the home. After the first home buyer concession, the duty applies to the value of $100,000 ($700,000 minus $600,000) instead of the total $700,000 purchase price.
The savings are even more than they might initially seem. Stamp Duty payments are calculated by property price tiers, which means the more expensive the property is, the higher percentage of duty that buyers need to pay, as outlined in the table below.
So, as first-home buyers only pay stamp duty on the land and not the property, they'll often fall in a lower bracket and pay a smaller proportion. They save on not paying stamp duty on the new build and paying a smaller amount of duty on the land.
| Property Price | Stamp Duty Calculation |
|---|---|
| Up to $25,000 | 1.4% of the property price |
| $25,001 to $130,000 | $350 plus 2.4% for every dollar over $25,000 |
| $130,001 to $960,000 | $2,870 plus 6% for every dollar over $130,000 |
| $960,001 and over | 5.5% of total dutiable value |
Who’s eligible for off-the-plan duty concession?
While the duty concession is for first-home buyers, other factors affect whether you receive the full benefit.
- You must be eligible for the FHOG as the same eligibility requirements outlined above (applicants must be above 18 years old, one of the applicants must live in the property within the first 12 months, etc.) also apply for the duty concession. If the only criteria you don't meet is that the property's purchase price is above $750,000, you're still eligible for the duty concession.
- If you pay less than the market value for your off-the-plan home, the property price is considered to be the real market value, not the price you paid.
Entering the market with First-Place
You might not know the exact benefit you can expect to receive before your grant and concessions applications are approved and your associated building costs are confirmed. But what you do know as a first-time buyer opting for off-the-plan is that you get some of the most significant financial support available for first-time buyers.
With a long history of helping first-time Victorian homeowners build their first property, entering the market with First-Place can get you capitalising on these benefits and stop renting as soon as possible.
Ready to build your home?
Check out our first home buyer guide for everything you need to know about building your first home, including finances, grants, buying land, buying a house and contract basics.
Price your home today with our home configurator, otherwise, give us a call on 1800 134 778 or enquire, and our sales team will get in touch.
Disclaimer
This advice in this article is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs. It is recommended you seek professional advice from a financial adviser before making any important decisions.
First Place is not a financial adviser. You should consider seeking independent legal, financial or other advice to check how the website information relates to your unique circumstances.
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