First-time buyers get a boost

As more people are buying their first residential property as an investment rather than a home, it's worth knowing where they stand with regard to the First Home Owner Grant (FHOG).

Money reader Jennifer, who has taken advantage of the downturn in Melbourne prices to buy an investment property, says she had a lot of pressure from people to take up the grant, but knew she did not want to move into the property as she is happy with where she lives. "There has been confusion also about whether I would still qualify for this for future properties that I would like to live in."

The good news for Jennifer is that she is very likely to be eligible for the FHOG when she does buy her first home, as long as she meets the eligibility rules. A proviso is that it is still around then, because we have seen a lot of tinkering with it since it was introduced on July 1, 2000.

The confusion came about because when the FHOG was started, one of the eligibility rules was that neither the person applying nor their spouse or partner could have owned, either jointly or separately with any person, an Australian residential property before July 1, 2000. This applied to both homes and investments. But this does not exclude people who bought an investment property after that date from a FHOG, as long as that property was not occupied for a continuous period of at least six months by the applicant or their spouse or partner as their family home.

In Victoria, where I am presuming Jennifer lives, a grant of $7000 for a first-home buyer still applies but, since the start of January 2010, the grant has been payable only where the price of the property or construction of the home does not exceed $750,000.

To be eligible, neither Jennifer nor her spouse or partner must have received a grant in any state or territory, she must be over 18 and either Jennifer or the joint applicant must be a permanent resident or Australian citizen at the time of settlement or completion of construction.

Victoria also has a first-home bonus, which means that, in addition to the FHOG, eligible buyers can receive a payment of $13,000 for new homes - a total of $20,000. If the home is in regional Victoria, the buyer may also qualify for the regional bonus of $6500, making a total of $26,500. The bonus is due to end for contracts entered into after June 30, 2012.

Stamp duty relief for eligible first-home buyers has recently changed in Victoria. It is available for those buying a home valued at up to $600,000. A reduction of up to 50% is being phased in over four years from July 1, 2011, with an initial reduction of 20%, followed by additional 10% reductions on January 1 in 2013 and 2014 and on September 1, 2014.

For more information on the FHOG and other benefits, go to www.firsthome.gov.au and click on your state.

Get stories like this in our newsletters.