Proposed Bill to close loophole in current First Home Owner Grant scheme

06 MAY 2022

 

Currently, the First Home Owner Grant (New Homes) Act 2000 section 13A(2)(a)stipulates that to be eligible for a First Home Owners Grant where the home is to be built, the cap for the total value of the transaction (being the aggregate of the cost of the land and the cost of the build) must not exceed $750,000.

Ordinarily, a person would purchase land to build a house and in the process, engage a builder and enter into a building contract. In these circumstances, after the building contract is entered into, the home owner may seek to vary and/or add additional upgrades, materials or features to their build. These post contractual variations may increase the cost of the build, subsequently increasing the value of the transaction.

The amount of the transaction for stamp duty purposes is calculated at the date of commencement of the contract - normally before these potential variations or additions occur. This means that despite the value of the transaction now exceeding the cap, under the current regime it is arguable that these post contract variations do not hinder a First Home Owners’ eligibility to the grant as at the commencement of the contract, the value of the transaction was still under the cap. This differs from owner builders, where there is a requirement to notify the Chief Commissioner of State Revenue and repay the grant in the event that they become aware that the total of the building transaction may exceed the cap.

This ambiguity is set to be remedied in the proposed amendments to the act made by the State Revenue and Fines Legislation Amendment (Miscellaneous) Bill 2022.

The amendment seeks to impose additional conditions on the First Home Owners Grant by relying on the continual requirement to comply with the eligibility cap requirements (including post contract variations). This will ensure that if the total value of a contract comes to exceed the eligibility cap (including post contract variations), the grant may be required to be repaid. Thus, the proposed bill will stop First Home Owners from increasing the building contract through post contract variations.

Whilst this amendment seeks to circumvent those taking advantage of the scheme by relying on post contract variations to keep their building contract within the threshold, the amendment appears to fail to take into consideration the current economic state of affairs. That is, as a result of material and labour shortages and world economic conditions, there have been a number of instances where builders have relied on post contract variations to increase their build cost due to the increase of material costs. In this scenario, this could mean that a first home owner could be required to repay the grant if the building contract increases above the threshold at no fault of their own.

Not only will the first home owner be disadvantaged by the increase of cost in their build but as a result of the proposed amendment, they could also lose out on the first home owners grant – making home ownership forever difficult.

For further information on the proposed bill and how it affects the First Home Owners Grants, please feel free to contact our Accredited Specialists in Property Law, Peter Crittenden, Ben Wong or Wade Thomas.

The contents of this publication are for reference purposes only. This publication does not constitute legal advice and should not be relied upon as legal advice. Specific legal advice should always be sought separately before taking any action based on this publication.

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