Opportunities for Homeowners and First Home Buyers to Upgrade or Build
On 5 June 2020, the federal government announced an extraordinary scheme to stimulate the economy by giving people $25,000 to renovate their homes or build a new house.
These grants are available for renovation works that cost between $150,000 and $750,000 and for new homes valued at less than $750,000. Renovations must improve the ‘liveability’ of the home, meaning that external non-essentials such as: swimming pools, tennis courts, outdoor spas and saunas, and detached sheds or garages do not meet the criteria.
This $688 million HomeBuilder scheme is designed to help the country through its first recession in 29 years.
What makes this grant timely and worthwhile?
If you are considering your first home or needing to improve or meet the needs of your growing family; this may be an ideal time to consider upgrading your current residence or for first home buyers to build a new home using the grant through the Homebuilders scheme.
Here are some of the benefits:
- The $25,000 grants could meet the cost of a kitchen or a bathroom fitting or renovation
- The current interest rates are at approximately 2.5 percent
- Labour prices have been adjusted because of Covid-19
- Tradies and builders are looking for work
- Planning is being fast tracked due to Covid-19
- You employ a private building certification inspector to ensure standards are being met for your build
- Since the Royal Commission in 2018 construction standards have improved with new reforms
- Builders are now cognisant of standard requirements for construction in terms of quality.
If you are a first home buyer, you may be eligible for the existing first home buyers’ grant of $10,000, and the exemption of stamp duty, which would equate to $24,000 for a $650,000 home.
Examples of how the scheme works
Treasury has provided some examples of how the scheme will work for those who are opting for renovations or new builds. These include the following:
An example of how the scheme works for renovations:
“Cassidy enters into a contract to substantially renovate her home on 31 December 2020, with renovations valued at $400,000. The value of her home is $900,000 based on an independent valuation.
Cassidy pays the builder $10,000 to commence renovation of her home on 2 February 2021. Cassidy then applies directly to the revenue office in her state or equivalent body to receive the $25,000 HomeBuilder grant.
The revenue office conducts the eligibility checks and confirms that Cassidy owns the property, is an Australian citizen, over the age of 18 and has a taxable income under $125,000 based on her 2019-20 tax return.
The revenue office also confirms the value of the renovations is within the HomeBuilder renovations price cap (between $150,000 and $750,000), the valuation of her home is less than $1.5 million and that Cassidy has made the first progress payment on the renovations.
The revenue office approves the application and releases the $25,000 HomeBuilder grant directly into Cassidy’s nominated bank account.
As Cassidy already owns her own home, she is not eligible for the First Home Owner Grant, the First Home Loan Deposit Scheme or the First Home Super Saver Scheme. However, Cassidy may be eligible for stamp duty concessions or other grants depending on the state or territory she lives in.
An example of how the scheme works for new home building:
“Emma and Liam enter into a house and land contract valued at $550,000 on 25 September 2020. Emma and Liam’s bank applies on the couple’s behalf to their state’s revenue office or equivalent body to receive the Federal Government’s $25,000 grant.
The state revenue office conducts the eligibility checks and reviews the couple’s documentation and confirms that both Emma and Liam are Australian citizens, over the age of 18, have a combined taxable income under $200,000 based on their 2018-19 tax return and the value of the contract is under the $750,000 dwelling price cap.
The state revenue office approves the application and will provide the $25,000 grant to the couple when they make the first progress payment (noting that construction must be contracted to commence within three months of signing the contract).
Emma and Liam commence construction on their new home and make their first progress payment to the builder on 2 November 2020. The state revenue office releases the $25,000 HomeBuilder grant directly into their nominated bank account once they have verified the couple has made their first progress payment to the builder.
As the couple are both first home buyers, Emma and Liam may also be entitled to their State’s First Home Owner Grant and stamp duty concessions as well as the Commonwealth’s First Home Loan Deposit Scheme and First Home Super Saver Scheme.”
Act while the grants are available
Opportunity knocks; even if you’re not buying take a look and assess the possible investment and equity in your home, before the fund runs out.
The scheme lasts from 4 June 2020 until 31 December 2020; therefore, contracts must be signed between July and December 2020 to take advantage.