Monday, October 16, 2017 / Real Estate
Getting caught up in the excitement of purchasing your first home, you may not be aware of your state taxation obligations and entitlements. It is important to know what these are to ensure that you budget for any state taxation liabilities and don't get caught out with any unexpected taxes or levies.
The First Home Owner Grant (FHOG) scheme was introduced on 1 July 2000 to offset the effect of the GST on home ownership. It is a national scheme funded by the states and territories and administered under their own legislation. Under the scheme, a one-off grant is payable to first home owners that satisfy all the eligibility criteria.
Thepayment is made only after a submission has been submitted to and approved by RevenueSA or a financial organization authorized by RevenueSA to process applications.
FHOG applies to the purchase of a brand-new home, townhouse or apartment that meets “local property or building of a new property”, standards anywhere in South Australia.
Unfortunately the FHOG ceased for established homes from 1 July 2014, primarily as an encouragement for first home buyers to stimulate the building and construction industry in South Australia.
There are various costs associated with purchasing a property that go beyond your actual property price and initial mortgage requirements. Here is a quick break down of these extra costs in South Australia:
Stamp Duty – This is a fee which is incurred on the transfer of the legal ownership. The amount of stamp duty you are required to pay is assessed on either the purchase price of the property or the market value of the property at the date of settlement. Whichever value is higher will be the one that is used to assess how much you will be charged. Stamp duty is required to be paid in order to allow you to be registered as the owner on the Certificate of Title for the property with the Land Services Group.
● Land Tax - Land tax is an annual tax which applies to all properties in South Australia, however there are tax-free thresholds and exemptions which exclude a number of properties from the tax. Generally speaking you will not be required to pay land tax on the home that you are living in.
● Emergency Services Levy - The emergency services levy is applied each financial year to properties in South Australia. The money raised through the levy is allocated to fund necessary emergency services.
As with land tax, you may be required to pay a share of the levy at settlement. The amount will be calculated by the conveyancing company engaged to transfer the property.
Each year, as the owner of the property, you will be required to pay the levy, which is calculated on the property's value, use and region.
The amount of FHOG payable is determined by the date that the contract to purchase or build a new home is entered into, or the date on which construction commenced for owner builders.
The First Home Buyers Grants Table below outlines the largest amount that can be gained under the current system.
On or after 1 January 2014
If you are purchasing an off-the-plan apartment that meets the required criteria, you may also be eligible for a Off-the-plan Concession (stamp duty)
On or after 1 January 2014
A property value cap applies to applicants who have entered into a contract to purchase or who begin construction with builders on or after 17 September 2010. The property value cap is $575 000 and applies to the market value of the property purchased or built.
If the property that is being built has a market value above $575,000 then the FHOG will not be eligible to be paid.
Calculating the Market Value of the Property:
In the case of a comprehensive building contract, the market value is:
● The total amount used for the purchase or building of the home, and the market value of the land on which the home is to be built as at the time the contract is made; or
● The amount required for the purchase (or the sum of the actual costs to build) the home and the market value of the land on which the home is to be built at the time the contract has been issued.
** ‘Comprehensive’ definition - A contract where a builder agrees to build a home, from the time the building starts to when it is finished and is ready for occupation
For example: if you arranged to have a new home built for $300,000, then the building process takes one year to complete, and in that year the home raises in value to $330,000 then you will be paying the fees on $330,000 and not the original amount of $300,000.
1. In any case, one of the applicants must be an Australian citizen or have permanent residency in Australia. New Zealand citizens permanently residing in Australia who hold Special Category Visas may also apply.
2. The applicant(s) or their spouse(s)/domestic partner(s) must not have previously owned a residential property anywhere in Australia prior to 1 July 2000.
3. The applicant(s) or their spouse(s)/domestic partner(s) must not have owned a residential property anywhere in Australia on or after 1 July 2000 and occupied that property continuously for a minimum six months.
4. All applicants must reside in the home purchased or built as their primary place of residence for a continuous period of at least six months beginning within 12 months after completion of the eligible transaction.
5. Each candidate must be an individual person (i.e. not a trustee or company) except in the cases of legal disability.
6. Each applicant must be at least 18 years of age at the time of making application for the FHOG.
7. The property purchased has a market value of $575,000 or less.
It is the responsibility of the applicant(s) to convince the Commissioner, that they have met the residency requirements as stated above. Applicants may be required to verify this later by providing documentation sustaining their period of occupancy (e.g. electricity and gas accounts, bank statements, landline and/or mobile phone accounts and household contents insurance policies).
Applicants who do not meet the residency requirements must contact RevenueSA in writing within 14 days of the date on which it first became evident that the residency requirements would not be complied with, and pay back the grant.
Applications need to be made within 12 months of completing the contract. There are many assorted banks that have been authorized as FHOG Approved Agents to process applications. Should you be obtaining funding through one of these financial institutions, you may apply directly through that financial institution. If you have entered into a contract to purchase or build, FHOG may be already available to you at settlement or at the time the foundations are poured.
Applicants can complete and lodge the appropriate application form with either an Approved Agent or RevenueSA. You can complete and lodge the application form with the financial institution providing your finance as part of buying or building your home, if they are an approved agent.
Purchase of a new home or an off-the-plan home
At date of Settlement
Contract to build
On date of first progress payment by Approved Agent.
|Within five days of after approval of the application following proof of the foundation being laid (please provide a copy of the first progress invoice).|
When application with appropriate supporting evidence is provided to the Approved Agent.
Within five days of RevenueSA approving the application lodged with appropriate supporting evidence.