Changes to Stamp Duty Home Buyer Assistance Schemes

With 1 July 2019 just around the corner, we thought it timely to examine the changes to the Stamp Duty Home Buyer Assistance Schemes set to take effect soon.

The Pensioner Duty Concession Scheme will expire on 30 June 2019

It is possible that this will be renewed, but this isn’t guaranteed.

The First Home Owner Grant Scheme will expire on 30 June 2019

First home buyers that intend to purchase a new home, substantially renovated home, or off-the-plan home, and still obtain the $7000 grant, must exchange their contract by 30 June 2019.

First home buyers that intend to buy vacant land to build their first home, and still obtain the $7000 grant, must have started laying the foundations of their home by 30 June 2019.

The current Home Buyer Concession Scheme will expire on 4 June 2019 (or possibly 30 June 2019).

The ACT Revenue Office website provides that the current scheme will not expire until 30 June 2019, but it’s prudent to note that the legislative instrument that provides for the current Home Buyer Concession Scheme expires on 4 June 2019. If the ACT Revenue website is correct, then the current legislative instrument must be extended, or a new legislative instrument notified, to continue the current scheme until 30 June 2019.

The current Home Buyer Concession Scheme:

applies only to the purchase of a new home, vacant land, or off-the-plan home;
does not apply to a substantially renovated home;
is subject to a maximum income threshold (‘income cap’);
is subject to a maximum property value (‘value cap’); and
has other eligibility requirements, such as the current and previous ownership test and residency requirements.

A new Home Buyer Concession Scheme will commence on 1 July 2019

According to the ACT Revenue Office website (and the ACT Government’s June 2018 announcement), from 1 July 2019 a new Home Buyer Concession Scheme will commence. Information about this new scheme, below, is based entirely on the information published on the ACT Revenue Office website. The legislative instrument that would be required to enact this new scheme has not been notified, and a draft is not currently available to confirm the details.

The proposed new Home Buyer Concession Scheme:

applies to the purchase of any home (vacant residential land and both new and established homes);
is subject to a maximum income threshold* (‘income cap’);
is NOT subject to a maximum property value (‘value cap’);
has other eligibility requirements, such as the current and previous ownership test and residency requirements.

It is important to know that the current Home Buyer Concession Scheme, and the proposed new Home Buyer Concession Scheme, do not require the buyer to be a ‘first home buyer’. The current and previous ownership test requires only that the buyer, and their domestic partner (if any), do not currently have an interest in any property, and have not held an interest in the previous two years (subject to limited exceptions).

It was somewhat unexpected that the proposed new Home Buyer Concession Scheme is not subject to a value cap. In effect, an eligible buyer (again, does not have to be a ‘first home buyer’) could purchase a
$3 million home and pay no stamp duty, saving $141 900 in duty (based on current duty rates, noting that these may go down by 1 July 2019). Of course, the eligible buyer, and their domestic partner (if any), are subject to the income cap, but keep in mind the income cap is likely to be based on the gross income received in the previous financial year.

Practical Comparisons

Although the Home Buyer Concession Schemes (current and proposed) do not require an eligible buyer to be a first home buyer, our examples below are of a first home buyer purchasing different property types.

Example 1

Fred is a first home buyer interested in purchasing an established property worth $650 000 to live in.

Exchange now

Neither the First Home Owner Grant Scheme nor the current Home Buyer Concession Scheme apply to established properties, so if Fred exchanges prior to 1 July 2019, he will obtain no benefits under any Home Buyer Assistance Scheme.

Exchange after 1 July 2019

Assuming Fred meets the other eligibility criteria, the proposed new Home Buyer Concession Scheme will apply and exempt Fred from any stamp duty. Based on current duty rates (noting these may reduce slightly by 1 July 2019), Fred will save $18 940.

The financially better option for Fred would be to exchange after 1 July 2019.

Example 2

Marlene is a first home buyer interested in purchasing an off-the-plan property worth $500 000 to live in.

Exchange now

Assuming Marlene is eligible, the First Home Owner Grant Scheme will give Marlene a $7000 grant. The current Home Buyer Concession Scheme will apply to reduce the stamp duty from $12 100 to $3705 (saving $8395). Total financial benefit to Marlene is $15 395.

Exchange after 1 July 2019

Assuming Marlene meets the other eligibility criteria, the proposed new Home Buyer Concession Scheme will apply an exempt Marlene from any stamp duty. Based on current duty rates (noting these may reduce slightly by 1 July 2019), Marlene will save $12 100.

The financially better option for Marlene would be to exchange now.

Example 3

Tatjana is a first home buyer interested in purchasing a brand new property worth $700 000 to live in.

Exchange now

Assuming Tatjana is eligible, the First Home Owner Grant Scheme will give Tatjana a $7000 grant. The current Home Buyer Concession Scheme will not reduce the stamp duty, as the property value is over the value cap. Total financial benefit to Tatjana is $7000.

Exchange after 1 July 2019

Assuming Tatjana meets the other eligibility criteria, the proposed new Home Buyer Concession Scheme will apply and exempt Tatjana from any stamp duty. Based on current duty rates (noting these may reduce slightly by 1 July 2019), Tatjana will save $21 220.

The financially better option for Tatjana would be to exchange after 1 July 2019.

Conclusion

First home buyers, and buyers that have not held an interest in property for two years, should crunch the numbers now, to ascertain whether they are better off exchanging a contract now, or whether they are better off waiting until 1 July 2019.

The Property Team at Lexmerca Lawyers, led by one of Canberra’s leading property lawyers, John Chamberlain, can advise buyers of their options and help work through the eligibility criteria of the various Home Buyer Assistance Schemes to ensure the buyer obtains the best financial outcome possible.

*Please note, the ACT Revenue Office website states that the income threshold takes into account the gross income of the property purchaser and their domestic partner (if any) for the financial year immediately prior to the transaction date. It also takes into account the number of dependent children that the couple may have.