On Thursday 4 June the Federal Government announced a $25,000 grant for new housing construction.
The Federal Government announced a $25,000 grant that will give eligible Australians $25,000 to build or substantially renovate their homes in an effort to boost demand in the construction sector and ease a predicted downturn.
This is a good step forward, particularly in light of industry predictions that the economic downturn associated with the COVID-19 pandemic could see a sharp decline in building projects in the pipeline. However, there are a number of limitations associated with the qualification criteria for this grant which should be highlighted.
The key points of the grant are as follows:
Applicable to natural persons who are Australian citizens over 18 years
Applicant’s income capped at $125,000 p.a. for individuals and $200,000 p.a. for couples based on the 2018-19 tax return or later
Must enter into a building contract between 4 June 2020 and 31 December 2020 to either:Building or renovating an investment property will not be eligible
Build a new home (value including land not exceeding $750,000) as a principal place of residence; or
Substantially renovate an existing home (value not exceeding $1.5m) as the principal place of residence, where the renovation contract is between $150,000 and $750,000.
Construction must commence within 3 months of the contract date and be undertaken by a registered or licensed building service contractor who has held the building licence or endorsed contractor license prior to 4 June 2020
Contract dealings must be at arm’s length and the contract price should not be inflated compared to fair market price.
The HomeBuilder payments will be distributed by the relevant State and Territory; they will go directly to the applicant and will not be taxable. Information on when and how to apply and access HomeBuilder will become available through the relevant State or Territory revenue office in due course.
It will be interesting to get further clarification on the rules particularly around terms such as ‘substantial’ renovation. Preliminary guidance suggests that this would be in relation to improving the accessibility, safety and liveability of the dwelling and would not apply to items unconnected to the main property such as swimming pools, tennis courts, spas, garages, etc. On this basis, presumably extensions to the back and second storey extensions would be allowable.
Furthermore, the requirement around construction beginning within 3 months of contract signing may exclude a lot of new apartment construction as they would typically require longer lead times due to presale and financing factors. This is unfortunate as the cap of $750,000 for new builds presumably aligns with the existing State and Territory First Home Owner grant which would otherwise be applicable to the purchase of new apartments off the plan.
It is anticipated that further stimulus incentives will be announced by State and Territory governments to complement this federal measure. We will continue to keep you informed on a timely basis.
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