4 June 2020: The HomeBuilder grant program
- Posted by Palladium Wealth Partners
- On July 14, 2020
- 0 Comments
According to recent statistics from the Australian Bureau of Statistics (ABS)* on weekly payroll jobs and total wages in Australia, between the week ending 14 March 2020 and the week ending 30 May 2020:
1. Payroll jobs in all industries decreased by 7.5%.
2. Total wages paid in all industries decreased by 8.3%.
Many economic and financial issues have emerged, and continue to emerge, due to the COVID-19 pandemic.
Importantly, to combat the economic and financial issues, the Government has implemented, and continues to implement, responses that aim to support individuals, households and businesses through this difficult time.
A new response, recently announced by the Government, is the HomeBuilder grant program—aimed at supporting the residential construction market (the construction industry).
To provide some context with regards to the construction industry, please see below:
1. According to the ABS^, in April 2020, new loan commitments* excluding refinancing (seasonally adjusted) fell 4.8% for housing (owner-occupier -5.0% and investor -4.2%).
*For example, including the construction of dwellings and purchase of newly erected dwellings.
2. According to the ABS*, between the week ending 14 March 2020 and the week ending 30 May 2020 in the construction industry, payroll jobs decreased by 5.8% and total wages paid decreased by 7.8%.
3. Master Builders Australia# revised (downgraded) their previous forecasts for the building and construction industry. In terms of new home building, this is outlined in the below table.
Comparison of Master Builders forecasts for new home building:
Before and after COVID-19
|Financial year||Previous forecast
HomeBuilder grant program
The HomeBuilder grant program is aimed at supporting the residential construction market—as shown above, the construction industry has been, and continues to be, adversely impacted by the COVID-19 pandemic.
In a nutshell, the HomeBuilder grant program is an uncapped, time-limited and one-off $25,000 tax-free grant available to eligible owner-occupiers to build a new home or substantially renovate an existing home.
- They are a natural person (not a company or trust).
- They are aged 18 years or older on the contract date.
- They are an Australian citizen.
- They meet one of the following two income caps:
- $125,000 per annum for a single applicant based on their 2018-19 financial year taxable income or later (2019/20 financial year); or
- $200,000 per annum for a couple* based on their combined 2018-19 financial year taxable income or later (2019/20 financial year).
*For example, couples in a registered domestic relationship, or those living as a couple on a genuine domestic basis.
- They enter into a contract between 4 June 2020 and 31 December 2020 to either:
- Build a new home as a principal place of residence, where the property value (house and land) doesn’t exceed $750,000; or
- Substantially renovate their existing home as a principal place of residence, where the contract is between $150,000 and $750,000, and where the value of their existing property (house and land, pre-renovation) doesn’t exceed $1.5 million.
Please note: Building or renovation work must commence on or after 4 June 2020 and within 3 months of the contract date. However, there may be discretion where commencement is delayed beyond 3 months due to unforeseen factors outside the control of the parties to the contract (e.g. delays in building approvals).
Process and timing
The HomeBuilder grant program will be implemented via a National Partnership Agreement with state and territory governments. An individual or couple will be able to apply via their relevant state or territory revenue office (or equivalent), once their state or territory government signs the National Partnership Agreement.
The following state and territory governments are signatories to the National Partnership Agreement:
- South Australia.
- Western Australia.
- New South Wales.
- Northern Territory.
- Australian Capital Territory.
States and territories will backdate acceptance of HomeBuilder applications to 4 June 2020 once the National Partnership Agreement is signed. And, if deemed eligible, the $25,000 grant will be paid to an individual or couple by their relevant state or territory revenue office (or equivalent):
- For new builds, the grant will be paid in line with the timing of payments for First Home Owner Grants, or at the discretion of their state and territory if there are no First Home Owner Grant schemes in place.
- For substantial renovations, the grant will be paid once at least $150,000 of the contract price has been paid in respect of the renovation.
Other important considerations
- Owner-builders and investment properties are ineligible under the HomeBuilder grant program.
- All dwelling types are eligible under the HomeBuilder grant program, including house, apartment, house and land package, and off-the-plan developments.
- An existing home that has already been completed, or started construction before 4 June 2020, is ineligible under the HomeBuilder grant program.
- Building or renovation work must be undertaken by a registered or licenced building service ‘contractor’ and named as a builder on the building licence or permit.
- The parties negotiating the contract must deal with each other at arm’s length. For example, the parties must be free and independent of each other, without a special relationship (e.g. relatives). And, the terms of the contract, and contract price, should be commercially reasonable.
- The HomeBuilder grant program can be used in conjunction with other measures, where applicable. For example, First Home Owner Grant schemes, stamp duty concessions and other grant schemes, as well as the First Home Loan Deposit Scheme and First Home Super Saver Scheme.
- The renovation work must improve the accessibility, safety or liveability of the principal place of residence. For example, the renovation work can’t be for a standalone granny flat, swimming pool, tennis court, or structure not connected to the property, such as an outdoor spa, shed or standalone garage.
If you would like to discuss anything mentioned above, and its relevance to your financial situation, goals and objectives, please contact us. After reading this article, you may also find the following of interest:
- Interest rates.
- Borrowing power.
- Property buying costs.
- Saving a home deposit.
- Stamp duty concessions.
- Loan repayment calculator.
- Loan guarantor arrangements.
- First Home Super Saver Scheme.
- First Home Loan Deposit Scheme.
- First Home Owner Grant Scheme.
*Australian Government, Australian Bureau of Statistics. (2020). 6160.0.55.001 – Weekly Payroll Jobs and Wages in Australia, Week ending 30 May 2020.
^Australian Government, Australian Bureau of Statistics. (2020). 5601.0 – Lending Indicators, Apr 2020.
#Master Builders Australia. (2020). Industry Forecasts: Revised Building & Construction Industry Forecasts, the impact of the COVID-19 economic shock.