What can I get as a First Home Buyer?

​Are you looking at entering the property market but do not know where to start? With all the different grants and concessions, as well as the First Home Saver Scheme it can be very daunting. Without the right know how you may miss out on thousands of dollars.

Let me start by breaking down the different incentives that are out there as they are different for the type of property you buy (new v established). Once you have a good grasp on what you can get then it is up to you to decide what type of property you want to buy.

First Home-Owners Super Savers Scheme – The government has now given you the ability to withdraw up to $30k of personal concessions to use as a deposit to purchase your first home if you are intending to live in it. This can be a newly built home or an already established home.

What does this mean? Basically, you can make additional voluntary contributions to your super (salary sacrifice or tax deductible personal contributions) which means rather than saving for your deposit with money that has already had tax taken out you can now increase your savings by only paying the contribution tax of 15% rather than your marginal tax rate.

Let us put this into context. Say John earns $60K per annum and he is currently saving $1000 per month. By the time that $1000 hits his savings account he has already paid $325 in tax. Now if John were instead to direct that same $1000 to his superfund he will only be paying $150 in tax meaning that for the same $1000 per month John gets to save an additional $175. Over the year that can add up to over $2k in tax saved for John which he can use for his deposit.
There is tax when it is withdrawn and this tax is John’s Marginal Tax Rate minus a 30% offset. So, if John takes out the 2 years of savings ($24K) he will pay $600 in tax. This is still over $3,400 better off for the 2 years just by utilising the scheme.

Now there are some things that need to be taken into consideration before you look at doing this:

• You need to be aware of the concessional contribution cap of $25k per annum which also includes your Employer Superannuation Contributions (Currently 9.5%).
• The maximum you can contribute is $15k per annum for a maximum of 2 years but they do not need to be consecutive years.
• Timing of when you apply to get the money out is especially important. You will need to apply for the funds prior to signing any contract and the funds can take up to 25 days to hit your bank account. Luckily once you have applied to get the funds out you have 12 months to sign a contract so you can do this prior to going house hunting.
• As the funds are in super if you do not withdraw them utilising the scheme then they will be subject to a condition of release meaning those funds will be basically be locked away until you hit 60.

First Home Owner Stamp Duty Concession - Most states give first homers that intend to live in the property, whether it be a new build or an established home, a concession on stamp duty. As stamp duty is different in each state the benefit you receive is varies by where you are buying.

• In Queensland this means if you purchase a home under $550k you can save up to $15,925 in stamp duty. The first home concession may still apply for a home valued over $550k.
• In New South Wales this means if you purchase a home under $650k you qualify for the full exemption and could save yourself up to $24,585 in stamp duty. For property values between $650k and $800k you are still eligible for a concession on the stamp duty.
• In Victoria they have both a duty exemption and a 50% duty reduction ( available when you purchase a property dutiable value up to $600k). The duty concession applies where the dutiable value is more than $600k but not more than $750k.  For example, if a property is purchased for $650k then you would save $22,174 in stamp duty.
• In Canberra they have removed stamp duty on any price property for first home buyers. Lucky them!!!
• In Western Australia if you purchase a home for $530k or less you receive a stamp duty concession with a possible savings of over $15k.
• In the Northern Territory you can get up to $18,601 off stamp duty as a first home buyer.
• In Tasmania, the concession provides a 50% discount on property transfer duty for first home buyers of established homes, which have a dutiable value of $400k or less

First Home Loan Deposit Scheme - To avoid paying Lenders Mortgage Insurance (LMI) you would normally have to save a 20% deposit, which could take years, or get your parents to go Guarantor which, even if they do have the ability now, their circumstances could change in the future and being a Guarantor for a mortgage could impact what they want to do.

The Ferderal Government’s new rules will guarantee 15% of the 20% deposit for 10,000 application per annum. This means that if you qualify you will only need to save 5% which could mean purchasing much sooner than you thought.

You will need to  apply with one of the scheme’s partners which are more of the major lenders rather than second or third tier lenders so your application will need to be stronger. Speaking with a good mortgage broker will show you the best direction to take.

First Home Owners Grant - This is a national scheme to help first time buyers access the property market as well as stimulating the building economy. Each state provides a version of the scheme therefore it is good to investigate your state’s benefit.

• You can get the Queensland grant of $15,000 towards buying or building your new house, unit or townhouse (valued at less than $750,000). The grant is paid per new home; not to each of the applicants for the same home.
• In Victoria a $10k First Home Owner Grant (FHOG) is available when you buy or build your first new home. The FHOG is $20,000 for new homes built in regional Victoria, for contracts signed from 1 July 2017 to 30 June 2021. Your first home can be a house, townhouse, apartment, unit or similar but it must be valued at $750,000 or less, be the first sale of the property as residential premises and the home must be less than five years old.
• Buying or building your first home in NSW? You may be eligible for a $10,000 grant under the First Home Owner's Grant (FHOG) scheme. This grant scheme only applies to buying or building a new home. The guidelines are that your home is newly constructed and has a total value of less than $600,000 and the land and the dwelling you intend to build has a combined value of less than $750,000.

HomeBuilder Grant - Currently, due to the economic effect of Covid-19, the Federal Government has announced a short term $25k grant for eligible applicants for building a new home (or substantially renovating an existing dwelling). To get this grant you will be required to apply no later than 31st December 2020.

In Summary - There is currently a lot of money you can get from the government right now if you play your cards right and if your goals for your first home align with all the existing grants and subsidies.

Remember though that property investment including purchasing a home to live in should always be considered a long-term investment. Therefore if the property you are looking at for the long term does not fit with the grants available then this should not be a factor in your final decision.

The information above is general information only and should not be taken as any form of financial advice as it does not take into consideration your personal circumstances. If you would like someone to provide you with a comprehensive financial plan incorporating the above, then please contact our office.
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