Key elements of the Australian Government’s ‘HomeBuilder’ scheme
On 4 June 2020, the ‘HomeBuilder’ subsidy program (HomeBuilder) was announced by the Morrison Government.
According to the Treasury’s HomeBuilder fact sheet (https://treasury.gov.au/sites/default/files/2020-06/Fact_sheet_HomeBuilder.pdf):
‘HomeBuilder will provide eligible owner-occupiers (including first home buyers) with a grant of $25,000 to build a new home or substantially renovate an existing home where the building contract is signed between 4 June 2020 and 31 December 2020. Construction must commence within three months of the contract date.’
The stated purpose of the HomeBuilder program is to ‘help the residential construction market to bounce back from the Coronavirus crisis.’ The program was established in response to a significant decline in the number of new construction contracts being entered into due to the financial impact of COVID-19, and it complements existing state and territory First Home Owner Grant programs.
In practical terms, some owners may be eligible for HomeBuilder while others will not, depending on their financial and other circumstances.
To be eligible for HomeBuilder, the owner must satisfy the following eligibility criteria:
a) they must be a natural person (not a company or trust);
b) they must be aged 18 years or older;
c) they must be an Australian citizen;
d) they must satisfy one (1) of the following two (2) income caps:
$125,000 per annum for an individual applicant, based on the owner’s 2018-19 tax return or later; or
$200,000 per annum for a couple, based on both individuals’ 2018-19 tax returns or later; and
e) the owner must enter into a building contract between 4 June 2020 and 31 December 2020 to either:
build a new home as a principal place of residence, where the property value (house and land) does not exceed $750,000; or
substantially renovate an existing home as a principal place of residence, where the renovation contract is between $150,000 and $750,000, and where the value of the existing property (house and land) does not exceed $1.5 million.
Construction must also commence within three months of the contract date.
In addition, please note that:
a) owner-builders; and
b) owners seeking to build a new home or renovate a home for an investment property,
are ineligible for the HomeBuilder grant. HomeBuilder grants are also not capable of being obtained for non-domestic construction works.
Implementation of HomeBuilder
It is understood that HomeBuilder will be implemented through the National Partnership Agreement, which will utilise existing state and territory mechanisms to distribute the HomeBuilder payments.
Once legislation has passed to allow states and territories to begin accepting HomeBuilder applications, the government has indicated that it will backdate these applications to 4 June 2020.
Issues to consider for new building contracts
When determining whether they are eligible for the HomeBuilder grant, an owner should take into account considerations including the following:
- In negotiating a building contract, the contract must be arms’ length as between the parties (ie, the contract must be a reasonable and commercial contract between unrelated parties).
- (Subject to eligibility) the HomeBuilder program covers dwellings such as houses, apartments, and house and land packages.
- The contract terms must be reasonable, and the price of the build should not be inflated. To that end, upon demand, the builder must provide evidence to the owner that the contract price is not more than a comparable build as at 1 July 2019.
- For contracts involving renovation works, the renovations must be made to improve the accessibility, safety and liveability of the home. Renovations for swimming pools, outdoor spas and saunas, sheds or garages and other additions to the property that do not meet these requirements, are not covered by HomeBuilder.
- Construction must also commence within three months of the contract date (to promote the purpose of the program, which is to get construction happening in the short to medium term – to counter the negative impact of COVID-19 on the domestic construction industry).
- HomeBuilder will also be non-taxable, which is consistent with existing state and territory First Home Owner Grant programs.
- HomeBuilder also applies to first home buyers, provided they meet the eligibility criteria.
Applications for HomeBuilder
Information on when and how you will be able to access HomeBuilder, will become available through your relevant state or territory revenue office.
Individuals who wish to apply for HomeBuilder should do so through their relevant state or territory administering authority. The authority will notify the owner of the outcome of the application.
We expect to see significant interest in the government’s HomeBuilder program in the months ahead. The program is expected to provide around 27,000 grants at a total cost of around $680 million.
Among other things, HomeBuilder is geared to help support the 140,000 direct jobs (plus another 1,000,000 related jobs) in the residential construction sector – including businesses and sole-trader builders, contractors, property developers, construction materials manufacturers, engineers, designers and architects.
This increase in residential construction will help to fill the gap in construction activity expected in the second half of 2020 due to the COVID-19 pandemic.
If you have any questions about this article please get in touch with the authors or a member of our Building & Construction team.
This information and the contents of this publication, current as at the date of publication, is general in nature to offer assistance to Cornwalls’ clients, prospective clients and stakeholders, and is for reference purposes only. It does not constitute legal or financial advice. If you are concerned about any topic covered, we recommend that you seek your own specific legal and financial advice before taking any action.