Government assistance for first home buyers

One of TaxBanter’s trainers clearly remembers the month of April 2000, just a few months before turning 20, when she and her sister (who was 18 at the time) bought their first home together in Sydney. It was nothing flash and the price tag of $165,000 attested to that — but in today’s market, even a $1 million offer would not guarantee a prospective buyer a better property in Sydney.

It was the encouragement and financial support of their parents that allowed the sisters to be able to purchase a property at such a young age. Little did they know that if they had held off just a few more months, they would have been eligible for the government’s new First Home Owners Grant of $7,000 (introduced on 1 July 2000 to offset the effect of the GST on home ownership), which would have made a significant contribution toward the purchase price.

Fast forward 20+ years – in the 2020s, waiting a few weeks, let alone a few months, can be the difference between paying $1 million or $1.2 million for a property, with house prices having grown at exponential rates recently. Nowadays it is rare to find two teenagers buying a home, with the median age of first home buyers in 2020 being 36 years old. It now takes an average of 11.4 years to save for a 20 per cent deposit for a first Australian home (14.1 years in Sydney). Australia’s housing affordability crisis has been much discussed and analysed and data from a Demographia International Housing Affordability survey revealed that out of 92 metropolitan cities in eight countries, five Australian capital cities dominate the least affordable housing markets in the September 2021 quarter.

After a national 22.1% increase in house prices recorded in 2021, there are many analysts highlighting indications that property markets In Australia are now easing, with dwelling values in Sydney and Melbourne recording modest increases of 0.3 per cent and 0.1 per cent respectively in the March 2022 quarter (2.4 per cent nationally). While a fear of missing out drove buyers to sign on the dotted line despite rising house prices, now a fear of paying too much and the ability to service finance has slowed this down, especially with the RBA’s increase to the official cash rate on 3 May — the first rise since November 2010 — and warnings of more mortgage interest rate rises to come.

Despite all of this, home ownership still remains a dream of many Australians and as such it is important to consider all options available that may help make this dream a reality.

First Home Loan Deposit Scheme — a Federal Government initiative to support eligible first home buyers purchase their first home sooner.

Part of an eligible first home buyer’s home loan from a participating lender is guaranteed by the National Housing and Finance Investment Corporation, to enable the individual to purchase their first home sooner with as little as a 5 per cent deposit. Usually, first home buyers with less than a 20 per cent deposit need to pay lenders mortgage insurance.

A guarantee of up to 15 per cent of the deposit means that the purchaser may be able to be approved for finance without needing to pay mortgage insurance.

In the 2022–23 Federal Budget the Government announced that it intended to increase the scope of the scheme as well as the number of applicants that will be accepted in a year. These changes were not legislated before Parliament was prorogued when the Federal election was called.

First Home Super Saver Scheme — another Federal Government program allowing first home buyers to save money for their first home by making voluntary contributions into their superannuation accounts. With the concessional tax treatment that these voluntary contributions are afforded (i.e. a 15 per cent tax rate within the fund) it is a way to save faster for that deposit on that first home.

From 1 July 2022, the amount of eligible contributions that count towards an individual’s releasable amount will increase from $30,000 to $50,000.

State and Territory governments also have home buyer grants and stamp duty concessions that can be accessed, primarily for individuals purchasing their first home. Check the relevant State or Territory government website for available schemes and their eligibility criteria.

Note:
The Government and the Opposition have both announced new housing affordability policies as part of their federal electioni platforms — including:

  • Government — first home buyers will be able to use a portion of their superannuation savings to purchase their first home (lower of 40 per cent of superannuation balance or $50,000)
  • Opposition — equity contribution from the Federal Government of up to 40 per cent of the purchase price of a new home or up to 30 per cent of the purchase price of an existing home (may be repayable)

Further info and training 

Join us at the beginning of each month as we review the current tax landscape. Our monthly Online Tax Updates and Public Sessions are excellent and cost effective options to stay on top of your CPD requirements.

Our Special Topic, Superannuation: Catching up, will consider the changes to the First Home Super Saver Scheme and other recent and upcoming superannuation changes for employers and individuals. You can attend this session online or in one of our nationally-presented Public Sessions. Our upcoming Superannuation Online sessions will also cover this information.

Online training

Face-to-face sessions

Our Public Session Tax Updates are available in 16 locations nationally and are presented monthly. Click here to find a location near you. Superannuation: Catching up will be presented throughout May at our Public Sessions.

Tailored in-house training

We can also present these Updates at your firm (or through a private online session) with content tailored to your client base – please contact us here to submit an expression of interest or visit our In-house training page for more information.

 

Our mission is to offer flexible, practical and modern tax training across Australia – you can view all of our services by clicking here