First home buyer incentives

Federal initiatives

The Australian Federal Government has implemented several initiatives to assist first home buyers in purchasing their homes. Here are the key initiatives currently available:

Home Guarantee Scheme (HGS)

The Home Guarantee Scheme aims to make homeownership more accessible for those who might struggle with traditional deposit requirements. HGS encompasses three main programs aimed at different groups of first home buyers:

Target groups

• First Home Guarantee: For first home buyers or those who haven't owned property in the last 10 years.

• Family Home Guarantee: Specifically for single parents with at least one dependent child.

• Regional First Home Buyer Guarantee: For first home buyers in designated regional areas.

Deposit requirements

• First Home Guarantee: Minimum five per cent deposit.

• Family Home Guarantee: Minimum two per cent deposit.

• Regional First Home Buyer Guarantee: Minimum five per cent deposit.

Location requirements

• First Home Guarantee: No specific location requirements.

• Family Home Guarantee: No specific location requirements.

• Regional First Home Buyer Guarantee: Must have lived in the regional area or adjacent regional area for at least 12 months prior to applying.

Government guarantee

• First Home Guarantee: Up to 15 per cent of the property value.

• Family Home Guarantee: Up to 18 per cent of the property value.

• Regional First Home Buyer Guarantee: Up to 15 per cent of the property value.

Availability

• First Home Guarantee: 35,000 places per financial year.

• Family Home Guarantee: 5,000 places annually until 30 June 2025.

• Regional First Home Buyer Guarantee: 10,000 places annually until 30 June 2025.

Source: Housing Australia

First Home Buyer Guarantee (HFBG)

This initiative supports up to 35,000 eligible first home buyers each year, allowing them to purchase a home with a deposit as low as five per cent without needing to pay for lender’s mortgage insurance (LMI). This insurance, which protects lenders in case of borrower default, becomes mandatory when the deposit is less than 20 per cent of the property value. The cost of LMI can vary but generally range from 0.2 per cent to 2.5 per cent of the loan amount.

Source: Housing Australia

Family Home Guarantee (FHG)

Launched in July 2021, this program is aimed at single parents with dependents, providing support for up to 5,000 applicants annually. Eligible participants can buy a home with a deposit starting from just two per cent.

Source: Housing Australia

Regional First Home Buyer Guarantee

Introduced in October 2022, this scheme assists up to 10,000 eligible buyers in regional areas, allowing them to purchase homes with a minimum deposit of five per cent and no LMI.

Source: Housing Australia

First Home Super Saver Scheme (FHSS)

The First Home Super Saver Scheme allows first home buyers to save for their deposit within their superannuation fund. Participants can make voluntary contributions and later withdraw these funds to use as a deposit for their first home, potentially benefiting from tax advantages.

The First Home Super Saver (FHSS) Scheme is an Australian Government initiative designed to help first home buyers save for a deposit using their superannuation fund. Here's an overview of the scheme:

Purpose and benefits

• Allows eligible individuals to save for their first home deposit within their superannuation account.

• Provides potential tax benefits, as contributions and earnings are taxed at the concessional super rate.

• Can boost savings by up to 30 per cent compared to a standard savings account for most people.

Key features

• Eligible individuals can contribute up to $15,000 per financial year.

• The maximum total amount that can be released is $50,000 across all year.

• Contributions must be voluntary and can be either concessional (before-tax) or non-concessional (after-tax).

• The scheme applies to contributions made from 1 July 2017.

Eligibility Criteria

To be eligible for the FHSS scheme, you must:

• Be 18 years or older when requesting a determination.

• Have never owned property in Australia before.

• Not have previously requested a release of funds under the FHSS scheme.

• Intend to live in the property for at least six months within the first 12 months after purchase.

Process

• Make voluntary contributions to your super fund.

• Request a FHSS determination from the ATO to confirm the releasable amount.

• Apply to the ATO for the release of funds when ready to purchase a home.

• Use the released funds as a deposit within 12 months (can request an extension to 24 months).

Important Considerations

• The property must be a residential premise, which can include vacant land for building.

• If you don't purchase a home within the specified timeframe, you must either recontribute the funds to super or pay additional tax.

• The scheme is assessed on an individual basis, allowing couples to each access their own eligible contributions.

The FHSS scheme offers a potentially tax-effective way for first-home buyers to save for a deposit, but it's important to understand all the rules and implications before participating.

Source: Australian Taxation Office (ATO)

Help to Buy Scheme

The Help to Buy Scheme is a proposed initiative by the Australian Labor Party aimed at assisting eligible Australians to enter the property market. Here are the key features of the scheme:

Equity Contribution

The government would contribute:

• Up to 40 per cent of the purchase price for a new home.

• Up to 30 per cent of the purchase price for an existing home.

Eligibility Criteria

• Australian citizens at least 18 years old.

• Income caps: Up to $90,000 for individuals, $120,000 for couples.

• Must not currently own property.

• Must occupy the purchased property as principal place of residence.

• Property requirements in the table below

State based initiatives

In addition to federal programs, many states offer their own support mechanisms:

First Home Owner Grants

A First Home Owner Grant (FHOG) is a one-off payment provided by state and territory governments in Australia to assist eligible first time home buyers in purchasing or building a new home. While it's a national scheme, it's funded and administered individually by each state and territory. In most cases, the grant applies to new homes or substantially renovated properties, while the grant amount varies by state and territory and can change over time. Apart from this, many states impose maximum property values to be eligible for the grant. Here is a summary of First Home Owner Grants by state and territory:

*Notes:

• QLD: $30,000 for contracts signed between 20 Nov 2023 to 30 June 2025; $15,000 for earlier contracts.

• SA: Changes effective from 6 June 2024.

• Applications generally require proof of identity and are processed through state revenue offices or approved agents.

There are three methods exemptions are calculated:

• Full exemptions: No stamp duty payable (e.g., in NSW for first home buyers on properties up to $650,000).

• Partial concessions: Reduced stamp duty for properties within specific value ranges.

• Sliding scale: The concession amount decreases as the property value increases.

Shared Equity Schemes

A shared equity scheme is a home ownership initiative where an equity partner, typically the government, contributes a portion of the property's purchase price in exchange for a share of ownership. Shared equity scheme offer several benefits for first home buyers:

1. Lower initial costs: Buyers can purchase a home with a smaller deposit and reduced mortgage size, making homeownership more accessible, and potentially eliminating the need for lenders mortgage insurance.

2. No interest or rent on government's share: The government's contribution doesn't accrue interest or require rent payments while the buyer remains eligible.

3. Shared gains/losses: Upon sale, the government shares in any capital gains or losses proportional to its equity stake.

4. Flexibility: Many schemes offer options to buy back the government's share over time.

5. Safety net: Some schemes provide support if buyers face financial difficulties, such as payment holidays or loan extensions.

Combining multiple schemes

First home buyers can often access a combination of federal and state-based initiatives, maximising their financial assistance. Key programs include:

• Home Guarantee Scheme (HGS): Allows buyers to purchase with a deposit as low as two to five per cent without needing to pay Lenders Mortgage Insurance (LMI).

• First Home Owner Grant (FHOG): A one-off cash grant available in various states for eligible first home buyers purchasing new homes.

• First Home Super Saver Scheme (FHSS): Enables buyers to save for a home deposit through superannuation contributions, allowing for tax benefits.

• Shared Equity Schemes: Such as the Help to Buy scheme or state-specific programs that allow the government to co-invest in the property, reducing the initial deposit required.