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Introduction
On the 1st of July, 2000, the Federal Government initiated a financial assistance package for people who were buying or building their first home. Called the First Home Owners Scheme (FHOS), it is designed to offset the impact of the GST with a one-off payment of $7,000 to eligible applicants. Since then over 250,000 Australians have used the grant to help purchase their first home.
History
In March 19th to December 31st, 2001, the grant was increased to $14,000 ($7,000 base grant plus an additional $7,000) for the purchase or construction of new property ONLY. This was done to help stimulate the building industry which had contracted markedly after the introduction of the GST. As a consequence, the $14,000 grant does not apply to existing property. A new home means a property that has never been sold by the builder/vendor, or been occupied as a residence by a tenant or other occupant. The purchaser must have proof, such as a statement from the vendor or other evidence, that the property meets these requirements.
From January 1st 2002, the $14,000 FHOG grant will reduce to $10,000 ($7,000 base grant continues and $7,000 additional grant is reduced to $3,000) for new home contracts. This scheme will terminate at the end of June 2002. For all contracts after this date, the FHOS will provide a $7,000 grant to both new and existing property.
In October 2008 the Federal Government announced a boost to the existing FHOS.
According to the announcement:
- First home buyers who purchase established homes will receive a boost of $7000 that will double the grant to $14,000
- First home buyers who build a new home or purchase a newly constructed home will receive an extra $14,000 to take their grant to $21,000.
First home buyers will be eligible for the First Home Owner Boost on contracts entered into from 14 October 2008 to 30 June 2009.
The FHOG now
The grant is not means tested. Joint applicants will be restricted to a single application for a single property and only one payment will be made. The offices of state revenue in each state administers the scheme for the Federal Government. Some states offer additional benefits and concessions. For details contact your relevant state authority.
Extended time periods have also been granted in relation to start and completion requirements for contracts entered into from October 9th, 2001. A detailed list of these amendments are listed in the table below.
When is the grant payable?
The grant is paid at settlement (if your lender is an approved FHOG agent) for the purchase of an existing property or for the construction of a property - when the building is ready for occupation (issue of building completion certificate by the relevant local government authority or issue of title). If the grant monies are being administered by an approved FHOG agent, payment can also occur on the first progress payment (first draw of the loan) for a contract to build. It is important to note that all applicants must occupy the home as their principal place of residence within one year of this event.
In order to ensure the FHOG is available at the time of settlement, it is expected that the original FHOG application along with any supporting documentation is returned with your lenders Letter of Offer. There is a potential of a delay in settlement, should the original FHOG application not be returned with the Letter of Offer.
How is the grant paid?
The grant is electronically transferred into the account nominated on the application form. If your lender is an approved agent for the FHOG then they will administer your grant application and payment
Can I use the grant for my deposit?
Yes. There are no restrictions or guidelines set by the legislation that restrict how you must spend the grant. Once the monies are deposited into your account, it is yours to do as you best see fit. However, if you would like to use the grant as your deposit, you should note that the grant is paid either at or after settlement. The FHOG can be used for construction draw downs if you are building a new residence and your lender is an approved FHOG agent. In practice, the vendor of the property or your financial institution (lender) will usually require the deposit to be made up front or within 14 days of signing a contract. Some lenders now allow the FHOG to be used as a deposit.
What to do if the grant is not enough?
 The FHOS is a great opportunity for many people to buy their first home. Unfortunately, for many more the grant is still not enough to get started. For one reason or another banks may be reluctant to lend you further finance. If this has happened to you, there may be other options to help you get started. Find out more.
The reason banks are hesitant is usually the presence of one or all the following:
- A high level of consumer debt usually in the form of personal loans or credit card debt.
- Your income is too low to afford the property of your choice
- The result is that normal bank qualification ratios are exceeded and the loan application is
- declined.
- Employment history or tenure is below requirements (e.g.: 12 months minimum duration)
- Little or no asset base to use as equity or security
- No savings
- Insufficient savings to cover purchase costs
- No savings history (usually a minimum of 6 months)
- People with previous credit defaults.
How can you find out more?
Visit the Federal Government web site at www.firsthome.gov.au/ to search information about the FHOS. The site gives a description of the FHOS with links to all state and territory FHOS web sites.
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Are you eligible?
You are eligible if:
 You are buying or building your first residence;- At least one applicant is an Australian Citizen or permanent resident. International migrants and New Zealand citizens may also qualify if they intend to take up permanent residency.
- Either you or your spouse* have not previously owned a residence in Australia (i.e. held registered title of a property in either or joint names) prior to July 1, 2000. This includes residential investment property except in the case where you have purchased an investment property or inherited property after July 1, 2000 and have never taken up residence in the property.
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* 'Spouse' includes defacto partners, whether of the same or opposite sex, who are living together or haved lived together as a couple for at least 2 years. If you are divorced or have left the defacto relationship and have never had a 'relevant interest' in a property you qualify for the grant - provided all other criteria are met.
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- From January 2004, at least one applicant will occupy the home as their principal place of residence within 12 months of settlement or construction and must occupy the home for a minimum period of 6 months.
What type of property is eligible?
It does not matter if you are building a new home or purchasing an established home. The home can be a house, unit, flat or any other type of self-contained, fixed dwelling that meets local planning standards. The grant does not apply to land only purchases or houseboats and caravans. An eligible home must be intended to be a principal place of residence and occupied within a reasonable period (within 12 months).
You can rent the property first, provided that you occupy the home as your principal place of residence within this period. The onus is on you to show that they you have lived in the property as your principal place of residence on a substantial basis if requested by the relevant Office of State Revenue (min. period is now 6 months).
The purchase is eligible if:
- The contract to buy a property is made on or after 1 July 2000; or
- The purchasers enter into a building contract on or after 1 July 2000 to have a property built; or
- An owner builder starts building a home on or after 1 July 2000.
How to apply
It is important that your FHOG application is done at the same time as your finance application and co-ordinated by your lender. This will ensure your grant is available at settlement. If your lender is not an approved agent you will need to get your solicitor to co-ordinate with the OSR and your lender. Check to see if your lender is an approved FHOG agent. Your FHOG application must processed by your lender before it can be lodged with the OSR. This is an OSR requirement.
Application forms are available from either an approved agent or your local Office of State Revenue. Forms can also be downloaded in pdf format from most OSR web sites. Applications must be lodged within 12 months of completion or settlement of your new home.
Supporting Documentation
Fully completed application forms lodged with an Office of State Revenue for processing will need to be accompanied by the following applicable supporting documentation:
1. Evidence of the purchase or construction of the home in the form of one of the following:
- A signed copy of the Contract of Sale or Agreement, if purchasing an existing home
- A signed copy of the building contract if building a new home
- Proof of commencement of construction. Letter from builder confirming construction has commenced. ( i.e. foundations have been laid).
- If property is new, a letter from solicitors/ vendors/ real est. agent is required confirming that this is the first time the property is being sold & this shall be the first time the property will be `lived in'.
- The contract must be dated and signed by all parties including the vendor (or builder).
2. Proof of completion of settlement, if buying an existing home, in the form of:
- A copy of the registration of title.
- Or if this is unavailable, a copy of the Current Title Search issued by the proper state authority showing the current ownership will be sufficient.
- Proof of completion of construction, if building a new home, in the form of a final building completion certificate issued by the relevant local authority indicating that the home is fit for occupation.
3. Proof of identity of all applicants, in the form of one of the following:
- A certified copy of each applicant's Birth Certificate; or
- A certified copy of an Australian Citizenship certificate; or
- A current Australian passport; and
- Photographic proof of identity in the form of one of the following:
- Driver's licence; or
- Employee identification card issued to public sector employees; or
- Tertiary / higher education student card; or
- 18+ card
- Certificate of Citizenship or Permanent Residency Visa
- Also, if an applicant or spouse has had their name changed by Deed Poll or by more than one marriage, a copy of all the relevant documentation is to be submitted with the application.
- International migrants who intend to take up permanent residency must provide
- Original or certified copy of a Permanent Resident Visa (Australian resident visa) and a signed declaration of your intention to reside permanently in Australia.
- New Zealand citizens are required to provide originals or certified copies of the following:
- New Zealand birth certificate or extract of birth certificate;
- New Zealand passport;
- New Zealand citizenship certificate; and
- a signed declaration of your intention to reside permanently in Australia.
Penalties
There are substantial penalties for making false or misleading statements in, or in connection with, an application.
The OSR in each State conducts random investigations and compliance checks to ensure applicants are entitled to receive the grant. A penalty may be imposed for knowingly making a false or misleading statement in, or in connection with, an application. The Chief Commissioner of State Revenue can also demand repayment of the grant and impose a further penalty equal to the value of the grant paid.
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