A grant of $25,000 is announced for homebuilders across Australia by the federal government. The HomeBuilder Scheme that is effective starting June is only available for a limited duration.
There has been a lot of talks about the grants ever since it got announced. There are also contradictions from the expert if the scheme will really bring the necessary change for construction professionals.
More than that, I know many of you are eager to know if you can avail it. The eligibility is mainly based on the value of house construction/renovation and the income. There are other constraints too. Don’t worry, we have covered all of it.
What is the HomeBuilder scheme?
You might have already heard about it in the news. It provides a tax-free grant of $25,000 for construction or substantial renovation projects in Australia. Announced by the federal government on June 2nd 2020, it is valid throughout 2020.
COVID-19 has brought in a lot of unpleasant things into our lives. One of which being the economic downfall has hit Australia with a recession not seen in decades. To help stabilize the economy, Morrison’s government have come up with a few stimulus packages.
HomeBuilder Scheme targets the construction workers who are jobless due to the COVID climate. Estimated to provide over 27,500 grants the total cost estimation of the scheme is around 688 million.
This is expected to help over 1,000,000 jobs in the construction field directly and indirectly. That’s not all. You can make use of the first home buyer benefit with this grant saving a good percentage of your total expenses.
The property industry is one of the most important industries in Australia. Some experts say, stimulus package is said to bring back momentum to the construction market. The low interest on loans will add to the convenience of getting into construction for many.
Eligibility criteria for the HomeBuilder scheme
The federal government has really narrowed down on who can make use of the HomeBuilder Scheme. Mainly based on the yearly earnings and value of the build.
You have to satisfy the following conditions to apply for the house stimulus package.
- 18 Year of age.
- Citizen of Australia.
- Natural person.
- A salary cap of $125,000 per year for singles and $200,000 per annum for couples based on 2018-19 taxable income.
- For newly build houses the house value is capped at $750,000 inclusive of land. In case of Substantial renovation, the estimated value of the project must be somewhere between $150,000 to $750,000 and the house to be altered is valued less than $1.5 billion.
- Investment properties and commercial establishments will not be eligible for the grant.
- The applicant’s intended place of principal residence only qualifies for the HomeBuilder scheme.
- The owner-occupier needs to sign a contract on or before December 31st 2020 to be eligible for the grant. Further, HomeBuilder Scheme specifies that all the professionals entering into the contract must be licensed professionals. Professionals who are licensed after the date of June 4th are not eligible.
- The construction must commence in three months from the date of entering into a contract with the builder.
- An owner-builder is not eligible for the scheme as it is targeted to benefit the construction market.
What kind of home can you build under the HomeBuilder scheme?
Off the plan, apartment, individual dwelling all of which can be bought under the HomeBuilder Scheme with the limitation of $750,000.
It also applies if you are already in the talks or pre-construction phase and haven’t signed the contract. On the contrary, if you have just signed the contract before June 4th, you are not eligible.
For those owning land and want to construct on it, the same condition applies. The cumulative value of land and house that does not exceed $750,000 are eligible. The same goes for complete demolition and rebuild.
What is a substantial renovation?
Substantial renovation, according to the fact sheet provided by the treasury means anything that changes the dwelling substantially and does not involve cosmetic changes only.
Even if replacement of foundations, taking down walls are not part of the plan, it must improve on accessibility, safety and/or liveability of the property. So, Swimming pool, granny flats, sheds, landscaping that are detached from the main dwelling can not be included.
So, cosmetic changes to the kitchen and bathroom probably won’t be eligible for the grant. If you are looking for anything of that sorts your super fund can help.
How to get $25,000 for your house renovation or build?
The grant is fairly new and the application process is not structured yet. The criteria, itself is said to be means-tested. For now, the applications process is taken care of by the state treasury after your state or territory has entered the National Partnership Agreement with the Commonwealth Government.
You will have to submit certain documents of the owner-occupier and some related to the property. You will need to hire valuation professionals for house value and an architect/building contractor to estimate the project value.
For a clearer view on the application process, we will have to wait or contact your state treasury personally. But do not idle till then. If you have plans of applying for the grant, you should start right now.
The signing of the contract with the building professionals before the end of 2020 is one of the qualifying factors. But signing the contract comes in at the middle of the construction timeline. You can’t get to contracting the next day you decide to build or renovate. There is a lot of preconstruction work that you need to do like applying for development approval etc.
Only buying off-the-plan houses have very less or no pre-construction work as the seller takes care of most of the work.
How can you make the best out of the current situation?
The construction market is facing a never seen recession like most other economic sectors. Though it is bad for professionals like us, end customers are going to be benefitted in the form of grants, rebates, stamp duty relaxation and low-interest loans.
Let’s see how much you can save if you have renovation plans in mind. The home renovation costs in Australia range from $20,000 to $300,000 which is well under the scheme limit of $750,000. If you fall under the salary limit mentioned, then the $25,000 grant is already yours. Plus, you can use the superannuation fund up to $20,000 if required. That is a total of $45,000 of relief in the renovation budget.
What about those looking for a new home? For most it is the same as above, you can enjoy a maximum of $45,000. If you are a first home buyer you have grants and relaxations raining. Because the HomeBuilder Scheme does not restrict or demean any other grants/relaxation scheme. You can avail any scheme to its fullest on top of the $25,000 home stimulus.
That can mean savings above $60,000 in some states for first home buyers. ($25,000 Homebuilder grant + up to $20,000 Superannuation fund + $15,000 first home buyer grant + rebates and stamp duty relaxations)
I wish I had these benefits lined up when I planned my first home. But never mind, at least you make the best use of the situation.
But don’t let the offers direct you to a hasty decision. Make sure your financial situation is strong and check for any major expenses expected in the near future.
Spend time on planning and research rather than regretting and repaying.