I was wrong in my understanding that the First Home Owner Grant (FHOG) scheme was not available to anybody who had previously owned property. The scheme is in fact better and more widely available than I had previously understood. Everybody should carefully read the following… it could be worth thousands of dollars to you or someone you care for.
In 2000 the FHOG scheme was introduced. It was designed to offset the effect of the GST on home ownership. This national scheme is funded by the states and territories and administered under their own legislation. Prior to its introduction there were various state government assistance programs at different times.
Under the scheme, a one-off grant of up to $7000 is payable to first home owners that satisfy all the eligibility criteria.
Along with this FHOG most states also discount their transfer duties and mortgage duties for First Home Owners. NB: from 1 July 2008, Queensland mortgage duty on property contracts has been completely removed.
On 14th of October 2008 the Federal government announced further assistance to first home buyers entering into contracts after that date, in the form of the First Home Owners Boost. This effectively increased the grant available to a maximum of $21,000 for those purchasing or building a newly constructed property. If you are purchasing an existing property the maximum available under this scheme is $14,000.
For more information about this go to http://www.firsthome.gov.au/
Some states have further grants available depending on where and what you are intending to purchase. The above link will take you to the relevant state government for further information.
This is great news for those trying to break into the property market and not get left behind.
Probably the most difficult and yet the most significant financial milestone is getting into the property market with your first property. It establishes a starting point for not only a home base to build your home and family life around but it is also, for many, a starting point on their accumulation of wealth. It is a base from which you can leverage the growing equity into other properties or other investments.
For most this first home purchase is ground zero in their financial life.
Currently the lower price end of the market, which is dominated by first home owners, is strong… demonstrating that many people are taking advantage of this “perfect storm” of low interest rates and property prices that have hesitated or even declined slightly. It is an ideal time for all property investors and those who can access the grant are making full use of this golden opportunity.
This is a great opportunity for those who can jump on board now, however, even with reduced interest rates there are still some without the necessary incomes to find a lender who will give them a loan.
For these people there is little consolation as they sit on the sidelines and watch the opportunity of their lifetime pass them by. Possibly they have a sufficient deposit and may not need the FHOG; rather be in need of extra income to meet the banks servicing criteria.
The answer for people in this situation may be taking on an investment property as their first property. “But won’t they lose the First Home Owners Grant”? That’s what I had previously thought too… but I was wrong. The answer is “No, not necessarily”!!! There may be an alternative to them letting this “Perfect Storm” pass by.
The name “First Home Owners Grant” can be misleading. Many people assume it means First Property Owners Grant. The key word is “Home”. It is possible to own investment property and still be eligible for the FHOG later. In fact you may wish to purchase a property as an investment and then later move into the property to claim the grant. Check the relevant government web site for your state to confirm you still satisfy the requirements of the grant.
Existing First Home Owner Grant eligibility criteria (Queensland):
- Be a natural person (i.e. not a company or trust), at least 18 years of age and whose interest in the property is not held subject to a trust
- At least one applicant is an Australian citizen or a permanent resident
- At least one applicant will reside in the home as their principal place of residence for a continuous period of at least 6 months commencing within 12 months of completion of the eligible transaction
- Not have previously received a First Home Owner Grant in any State or Territory of Australia
- Not have previously owned or held a relevant interest in a residential property anywhere in Australia prior to 1 July 2000
- Not have occupied for a continuous period of at least 6 months, a residential property in which they acquired a relevant interest on or after 1 July 2000 anywhere in Australia
Points 5 & 6 are important and often missed. Under the Queensland criteria, and it is very similar in other states, it is possible to amass an investment property portfolio without impacting on your eligibility for the grant when you decide to settle down somewhere. That is, as long as none of your properties were purchased prior to 1 July 2000 and you did not live in any of them for 6 consecutive months or more.
Therefore, building equity through investment properties can actually assist you to take advantage of the current economic opportunities and increase your wealth… equipping you to purchase a better home later.
For those who are happy to stay at home longer or remain renting there is no reason to let the opportunities go past. Explore the possibilities, do the maths. A $300,000 investment property increasing at an average of 10% per year equates to $30,000 after one year, $63,000 after two years and so on. This has certainly got to be a whole lot better than doing nothing.
Happy Investing,
Nick Lockhart
mrd customer care program… because investing is personal
Reader Comments
Regarding a person getting the first home owners grant to buy an inv property:
1st- the law states you have to live in the property you buy for at least 6 months within 12 months of it being bought. So how can you buy an inv property to claim the grant and then not live in it but rent it out. Also the taxes etc when you purchase are different for inv properties to home purchase.
Or do you mean buy it first as an inv property then rent it out for 6 months and change the dwelling to residential home and move in after 6 months? Regards Nick
When first reading your article “I Was Wrong” regarding selection criteria for the First Home Owner’s Grant, I was momentarily excited that my three daughters might be eligible after all.
Three of my daughters have acquired properties in the past. Two of them purchased, one in 1983 and one in 1984, and another daughter in the late 80′s or early 90′s. They bought, either with a partner or singly. If I remember correctly, one received a Govt. Grant of approx. $2500, another qualified for a Keystart loan, and I think the third may have received a Govt Grant in partnership with her future husband (not sure on that). Unfortunately, they have all since sold those properties for various reasons, e.g. divorce, or to travel.
I think now though, from what I am reading in your article, that they cannot access the latest offer after all. Is this correct?
Unfortunately, since coming home, the continual rent rises just make it impossible for the single woman to get that deposit together to get into the housing market again. Most unfortunate, as all would like to put their increasing rental payments to better use with their own homes. And, this is apart from the problem of continually having to move house.
I can’t understand why the Govt. doesn’t make these Grants available to a wider range of people, to allow them to once again be home owners.
After all, these young people who do qualify for the First Home Owner’s Grant, may also be recipients of the Baby Bonus, as well.
Others, like my daughters, who are willing to buy get no help at all. And as the years go by it becomes increasingly difficult and out of reach, considering the increases in home prices and the high rents they have to pay.
I have also heard of early retirees who have sold their homes to buy a caravan, in order to travel for a number of months. Now back again, they find they cannot buy another home because of the huge increase in prices as a result of the recent housing boom. Does this mean they now have to get used to living in a caravan for the rest of their days?
They are all taxpayers, and should be able to participate in this golden opportunity. There could be a huge number of willing buyers out there, wishing to own their own homes again. These potential buyers would also stimulate the housing market, which is what it is all about.
On the other side of the coin, I understand new arrivals from overseas can qualify for the First Home Owner’s Grant, even to buy homes up to the value of $1,000,000. These people have never paid tax in their new country, and also, if being able to acquire a home of that value, there doesn’t seem to be any need for a taxpayer funded Govt. Grant. I’m sure there are many more deserving recipients.
If you think my daughters may be eligible, I can furnish more specific details. My memory is pretty good, but these events were some time ago.
Two daughters are living in Western Australia, and another is in Melbourne.
Many thanks for your articles, Nick. We look forward to the information you provide. Regards, Maxine.
Good informative reading regarding the widely accepted fact of the First Home Owners Grant. I have wondered the same as Maxine & Bob, how this scheme/grant applys to me as I divorced in 2000 and fiqured this grant was unavailable to me as I previously owned a home. I have been renting ever since as and as we all know how difficult it is to get into the market. A bit more clarity on this would be appreciated.
Many regards and thanks for the information you put out. Angela
Hi Nick,
Yes, you are right. Under the Queensland rules you do need to live in it for a period of 6 months and that 6 month period must start within 12 months of purchasing the property. Once that 6 month qualifying period has expired you are free to move out and rent it or anything else you choose to do with it.
What we were referring to in the article was that buying an investment property doesn’t necessarily exclude you from claiming the first home owners grant for a property you choose to live in later. There would be many people who don’t have the financial capacity to purchase a home to live in but with the help of the rental income may be able to purchase an investment property. We would encourage people in that situation to look at purchasing their first property as an investment rather than sit out of the market altogether. Purchasing the investment property would not disqualify them from the FHOG. Hope this helps.
Regards,
mrd.
Hi Maxine,
Firstly with your daughters situations. In Queensland the criteria to be eligible is:
Existing First Home Owner Grant eligibility criteria (Queensland):
1 Be a natural person (i.e. not a company or trust), at least 18 years of age and whose interest in the property is not held subject to a trust
2 At least one applicant is an Australian citizen or a permanent resident
3 At least one applicant will reside in the home as their principal place of residence for a continuous period of at least 6 months commencing within 12 months of completion of the eligible transaction
4 Not have previously received a First Home Owner Grant in any State or Territory of Australia
5 Not have previously owned or held a relevant interest in a residential property anywhere in Australia prior to 1 July 2000
6 Not have occupied for a continuous period of at least 6 months, a residential property in which they acquired a relevant interest on or after 1 July 2000 anywhere in Australia
Other states are almost identical. As they held a relevant interest in a property prior to 1 July 2000 in my opinion they would be excluded under point 5.
The First Home Owners Grant is targeted at helping people obtain their first home but, as you say, there are many people trying to break into the housing market having sold or otherwise lost their initial home. It is very common now for people to get divorced, separated, bankrupted or just move for work or family reasons. The great thing we like about the property market is that it is so stable and rises consistently over time. This can be a double edged sword as it makes it harder to obtain the properties in the first place.
There are many different ways to help those trying to break into or break back into the property market. An alternative to limiting assistance to first home owners by way of a grant is that the government could have used a system similar to the Higher Education assistance scheme, HECS. This is where they provide a loan with a very low or no interest for a period. They could reclaim the funds through tax returns based on taxable incomes in the same way they do with HECS. The mechanics of the system are already in place so they would just need to duplicate the existing HECS system.
No matter what system they use there will be some group of people who will be disadvantaged by it.
The banks aren’t helping much at the moment either as 100% loans are becoming scarce. One alternative is a shared equity type loan where someone else provides equity in an existing property to help someone get started. There are many families helping their children in this way. There is also the option of buying in partnership with others but you need to make a legal agreement covering the rights of each before you enter into anything like this. Although it is harder now, it is not impossible. As with anything in life, if someone wants it bad enough they will find a way.
There is enough historical evidence to show that residential properties increase in value over time. If people chose to sell their home to buy a caravan I believe it would be naive to then expect to be able to trade back later. They are trading an appreciating asset for a depreciating asset. Not a wise financial decision in my opinion.
We actively discourage people from selling property. It will continue to increase in value and if your name isn’t on the title then that growth will go to someone else.
Our society is becoming a society of haves and have-nots. The gulf between the two is growing as those who have assets accumulate more assets and those without get left behind. It is no secret that I am a great believer in the wealth building power of property and I would encourage anyone to seriously consider any options available to them to be in the “haves”.
Please also read the feedback to Angela’s question.
Regards,
mrd.
Hi Angela,
In Queensland you would be disqualified in my opinion as you have previously owned or held a relevant interest in a residential property in Australia prior to 1 July 2000. I am assuming you bought the property prior to 2000.
With interest rates coming down so much, the gap between rent and mortgage payments is shrinking so you may soon have an opportunity to get your name on a title deed again.
One option you may like to explore is to buy an investment property first. Depending on your financial situation you may not be able to purchase a home to live in but with the added rental you may be able to afford a rental property. At least then you would be in the property market again and as the equity grows you could purchase more investment properties or your own home.
If you are interested in looking at this please complete a borrowing capacity form here and one of our team of finance experts will see how viable that alternative is.
Please also read the feedback to Maxine’s question.
Regards,
mrd.
hi,
how about instead of the govt giving away $14,000 and $21,000 tax payers dollars for free they give away these sums or $30,000 interest free, payable back to the government and the tax payers when the property is sold?
This would recycle our money and keep the economy afloat – after all once its gone its gone and deficit is a dirty word in anyones book.
Say someone buys 7 years earlier and sells, they should make a profit and the above amounts will be as nothing and they can afford to pay back the government.
Your views please….
And wheres the free grant lots of us never got? Why should some get it and others not qualify as they have owned homes and paid their rates and taxes for years and years and …
Hi Donna,
Yes, you have some very valid points here. There are many ways to help people into home ownership. The governments choice of initiating the First Home Owners Grant has created some discussion about whether it was the most effective way to boost home ownership.
As you say, there are many people who could use this assistance but do not qualify. I agree with the free or low interest loan. The Govt could means test it and use a system similar to the Higher education system HECS where they claim it back based on their taxable income.
While there are many people trying to get their first home there are also many trying to break back into the market. The people who have been out of the market due to hardship, divorce, bankruptcy etc all may need similar assistance.
The first property is always the hardest. Once you are in the market then you have growing equity which can help with the 2nd, 3rd etc but it is that big first step that holds most people out of the market.
The banks are reducing the availability of 100% loans now but there are products that allow people to use equity in other people’s properties to support their loan. Many parents use this method to help their children into their first homes. It used to be that the guarantor in this case would be responsible for the entire loan but there are products around now that limit the liability to just the part secured by their property. You may want to discuss this with a competent broker to see if this is suitable for your situation.
Regards,
mrd.
Regarding the FHO concessions, I can’t seem to find out if you son/daughter-in-law would be eligible, they are buying my investment house for which I will be giving them a private loan. So basically no money changes hands when the solicitor attends to the transfer documents, but is paid back in installments directly to me.
Appreciate any information on this.
Thanks you, Kay ED
Slightly off-topic, but the eligibility criteria to “Not have previously received a First Home Owner Grant in any State or Territory of Australia” applies to the applicant as well as spouse/partner. That means starting a relationship with someone who has already received the FHOG will make me ineligible for it myself. Isn’t that a $14,000 reason to stay single?
Hi Kay,
Thanks for contacting us.
In Qld – it is similar in other states, providing they meet the criteria mentioned in that article, and as long as they reside in the property for at least 6 months and move into it within 12 months after purchase they should be able to claim the grant. From my understanding, it does not matter who provides the finance, it is the name on the title deed that is important.
I am not able to give you personal advice, so you may need to consult your accountant for independent advice for your own circumstances. For more information on this see: http://www.firsthome.gov.au/. I trust this helps.
Kind regards,
Rod.
Hi Sammo,
Thanks so much for taking the time to comment.
It seems as if you are correct – at least in Qld.
See: http://www.osr.qld.gov.au/fhog/first-home-owner-grant/eligibility.shtml
I guess that means you will have to narrow down your search for a spouse who has no previous record of a FHOG! so you can still receive the grant (only kidding).
Please don’t hesitate to contact us if we can be of further assistance.
Kind regards,
Rod
Hi Rod,
My wife and I are looking to buy our first home together (she has previously received the FHOG in a previous relationship). Our mortgage broker told us if we only put my name on the title and loan then we are eligible because I am the only one entering the contract. Is this a legal loophole the banking industry is using to help more first time buyers get what they want?
If we tried this and received the grant, what are the chances the government would find out and would there be any implications?
Regards,
Warren.
Hi Warren,
I have checked on the eligibility criteria for Queensland and my understanding is that you would be eligible. The key is the sentences:
“This includes anyone who is or will be on the title of the property with you. If you have a spouse who will not own any part of the home, you must include them on the application as a non-applicant spouse. All applicants must meet the eligibility criteria.”
If your spouse was not on the title then she would not have to meet the eligibility criteria.
I got the information below from this web site: http://www.osr.qld.gov.au/first-home-owner-grant/eligibility-fhog/index.shtml
They have an email or phone enquiry option through this web page: http://www.osr.qld.gov.au/about-us/contact-us.shtml#EnquiryForm
Before you do anything I would enquire with the correct authority, preferably by email so you have a written record of it.
Hope this has been of some help.
Doug Wroe
Hi,
Im wondering if anyone knows whether a guardian or parent is able to apply for a grant for their child before they are 18years old. I’ve heard before that they are but am unable to find any information about it. If anyone knows, the information would be apreciated.
Thankyou, Lola.
Hi Lola,
The information I have read on this site http://www.osr.qld.gov.au/first-home-owner-grant/eligibility-fhog/index.shtml is:
While it is outside the normal policy there is provision to apply in special circumstances.
We would recommend contacting the Queensland Office of State Revenue on 1300 300 734 (or the equivalent in your state) and ask further about this.
Thankyou very much,
I will have to check what the regulations are in Victoria, unless you have any information on that.
hi, i was just wondering if i was to buy my first house with say 2-3 other people would we all get the grant or would it be void because we were all going in together?
Hi Adrian,
Thanks for taking the time to blog your question.
I have taken this from the application form. My understanding is that each person would apply for the grant separately as you would each be purchasing a piece of the property as “tenants in common”. If you were purchasing as “joint tenants” then the FHOG status of the others may come into effect much the same as a spouse.
All applicants would need to reside in the house as their main residence.
I would recommend clarifying this by calling the Office of State revenue on 1300 300 734.
To apply:
n Applicants must:
P fully complete the application form and lodge with all relevant supporting documentation.
P be a natural person (i.e. not a company), at least 18 years of age at the commencement of the eligible transaction.
P ensure at least one applicant is an Australian citizen or a permanent resident at the time of completion of this application form.
P be buying or building a home or building a home as an owner builder.
P ensure each person holding a relevant interest in the home is an applicant.
P ensure all applicants will reside in the home as their principal place of residence for a continuous period of at least 6 months commencing within 12 months of completion of the eligible transaction.
P lodge a completed application with all supporting documentation within 12 months of completion of the eligible transaction.
n Applicants and their spouse/de facto partner must:
P not have previously received a First Home Owner Grant in any state or territory of Australia. If a grant was received but later paid back together with any penalty, you may be entitled to reapply for the grant.
P not have previously owned or held a relevant interest in residential property anywhere in Australia before
1 July 2000.
P not have occupied residential property in which you acquired a relevant interest anywhere in Australia on or after 1 July 2000.
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Hi,
My fiancée bought a unit back in 2005 under his name. We met in 2007. Would I be eligible to purchase a property under my name solely and still qualify for FHOGS? Your help would be greatly appreciated! Cheers
Hi Eliza,
The rules are a little different for each state but my understanding is that two individuals can each have their own FHOG provided they meet the criteria which includes living in the property for at least 6 months.
Did your Fiance live in his unit? If not then he may be able to get the FHOG as you are allowed to own investment properties and still get the FHOG when you purchase your own home.
Once your Fiance becomes your spouse you may not be eligible for the FHOG even if it is entirely in your name.
More information about eligibility is available here – http://www.firsthome.gov.au/
Thanks for your question,
Doug Wroe
Very informative but as a ‘new’ australian – resident for only 2 years now – i was wondering how the Qld OSR (Office of State Revenue) checks to see whether an applicant has owned overseas property in relation to the concession for stamp duty. Surely there is no world wide record of property ownership !! Do they rely on the honesty of applicants?
Hi Steve,
Yes, you are right. There is no global property ownership record so it would be difficult for the government to know if you did not declare any previous ownership in other countries. Many countries do exchange information depending on their political relationship. I would encourage you to declare anything relevant at the time.