The HomeBuilder scheme in Victoria
You may have read a lot about the HomeBuilder grant. There have been multiple separate updates from the federal and state governments making it all a bit confusing. In this section, we summarise the main points that are relevant to the scheme as it is being implemented in Victoria. Although the scheme applies to renovations of existing houses, we don’t cover that aspect of the scheme here.
What is the story so far?
The HomeBuilder grant was announced in early June with the aim of helping the residential construction market bounce back from the COVID-19 pandemic. The grant gives eligible people $25,000 to build a new home or substantially renovate an existing home. As a result of the scheme, many of our clients have seen an increase in demand particularly for titled vacant land.
Although it’s a Federal Government initiative, each state and territory government is responsible for implementing it. So the details of the implementation in each jurisdiction are a little different. Since mid‑August, all states and territories have started accepting HomeBuilder grant applications.
When can buyers benefit?
Here is a quick snapshot of who can potentially benefit from the scheme. To be eligible, an applicant must:
- be a natural person aged 18 years or older at the contract date
- be an individual or a couple (but not another type of family relationship eg siblings won’t be eligible)
- be an Australian citizen when they apply
- meet the income caps
- apply by 31 December 2020
- live in the property as their principal place of residence and retain ownership for at least 6 months from completion of construction or settlement.
What are the key dates?
There are different deadlines depending on the particular circumstances. Here are some of the key deadlines.
For off‑the‑plan apartment and townhouse contracts, the timing is:
- sign the contract of sale between 4 June 2020 and 31 December 2020
- construction must commence within 6 months of the contract date
- become the owner of the land when the building is completed and the applicant is entitled to take possession and this must occur by 31 October 2022.
For new home builds (where a person buys vacant land and then arranges for a builder to build the house):
- sign the building contract between 4 June 2020 and 31 December 2020
- construction must commence within 6 months of the building contract date
- become the owner of the land by the time the foundations are laid and the first progress payment is made.
What else do I need to know?
1. Online portal – The Victorian State Revenue Office (SRO) has launched an online portal enabling people to lodge their applications. Applicants can lodge their initial application when they enter into an eligible contract. The deadline for lodgement is 31 December 2020. So, if a contract is entered into on 31 December 2020, the application would need to be made the same day.
2. Price cap – In the case of:
- a new home build, the house and land value; or
- an off‑the‑plan contract, the contract price,
must not exceed $750,000 (inclusive of GST).
3. Timing for commencement of construction – To be an eligible contract, construction must commence within 6 months of the contract date. For jurisdictions other than Victoria, this period is 3 months with a possible extension of 3 months. The 6 month period in Victoria recognises the fact that Melbourne has been in stage 4 lockdown and regional Victoria has been in stage 3 lockdown, which may delay the commencement of construction.
4. Meaning of ‘commencement of construction’ – In Victoria, ‘commencement of construction’ means the commencement of excavation and site preparation works.
Some states and territories have defined this concept differently. The approach in Victoria appears to be more favourable to applicants than that taken by some of the other jurisdictions. For example, Tasmania defines it to be when the laying of foundations is complete.
5. Construction may start before sales contract signed – For off‑the‑plan contracts, the contract of sale of land may be signed after the developer has started construction of the development. However, the construction must not have started before 4 June 2020.
6. Application process – Applications are lodged in a multi-step process. The first step of the process occurs when the eligible HomeBuilder contract is entered into. Once construction has commenced and the payment eligibility requirement milestones have been met, any additional supporting documentation must be lodged.
7. Timing of grant payment – For off‑the‑plan contracts, the grant is paid after settlement. In the case of new home builds, it is paid after the foundations are laid and the first progress payment is made to the builder. However, when you add the SRO’s processing and payment time, realistically, the payments are likely to be made closer to a month after that.
8. Builder’s licence or registration – The grant isn’t available to owner builders. The builder or developer must be a registered or licensed building contractor. It’s not available where they became registered or licensed on or after 4 June 2020.
Could the grant be extended?
The Federal Government forecasted that 27,000 Australians will build or renovate using the grant.
Depending on the actual uptake, there is scope for the various governments to agree to change how the scheme operates, including to extend the scheme. It will be interesting to see if that happens.
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