First Home Owner Changes

First Home Owners Grant

As of 14 October 2008 the ‘First Home Owners Grant’ has increased to $14,000 for second hand dwellings and $21,000 for new dwellings. The increase only applies to contracts entered into between 14 October 2008 and 30 June 2009. All standard eligibility requirements must still be met. The increased grant is not applicable to any contracts rescinded and re-entered solely to take advantage of the increased grant.

The NSW State Government further announced within its most recent mini-budget an additional supplement of $3,000 towards new dwellings. The additional supplement applies only to new contracts entered into between 11 November 2008 and 10 November 2009 and similar restrictions apply.

The NSW State Government has also announced measures to cap the Grant at $7,000 from 1 July 2009 and also limit the eligibility criteria to homes valued under $750,000 (subject to Federal approval).

First Home Saver Accounts

1 October 2008 saw the commencement of the Federal Governments ‘First Home Saver Account’ incentive scheme. The scheme is aimed at assisting first home owners save for a deposit towards their first residential home and provides a number of incentives and conditions.

Eligibility
In order to be eligible for a ‘First Home Saver Account’ you must:

  • be aged between 18 years and 65 years;
  • have a valid Tax File Number; and
  • have never owned a residence in Australia used as your primary residence (this does not include investment properties).

You may only open one account per individual, however, some exceptions do apply.

Incentives

  • when you open an account you must make a minimum contribution of $1,000 in four financial years (not necessarily consecutive years) while the account is open;
  • you can contribute as much or as little each year as you like, however, there is a maximum amount that the account may hold over the life of the account which is currently $75,000 for the 2008-09 financial year (indexed each year);
  • the Federal Government will contribute 17% on top of your contributions each year up to a maximum of $850 during the 2008-09 financial year (indexed each year);
  • all costs and taxes are paid by the service provider so you do not incur any additional costs, expenses or taxes.

When ready to buy

You can withdraw the funds in your account at any time (tax free) provided:

  • you withdraw all the funds and close the account;
  • you put the payment towards the costs of buying or building your first home within six months of withdrawing the funds;
  • you live in your house as your main residency for at least six months starting from either the settlement date or the building completion date.

What if you do not buy anything or reach 65?

If you choose to close your account without putting the proceeds towards your first home all of the funds must be deposited into your nominated Superannuation Account. Generally the funds cannot simply be withdrawn.

When you reach the age of 65 your provider must close your account as you will no longer be deemed eligible for an account. All of the funds of your account can be either paid out to you or transferred into your nominated Superannuation Account

 

Written by Emanuel Oros, Paralegal