Stamp Duty Rebate On Land Is Possible When Building First Home
Qualifying for the Australian government's First Home Owner Grant (FHOG) scheme can be confusing with all the rules and criteria. An excellent source of eligibility criteria for all Australian states or territories for the first home buyers grant may be found here. Even within the government supplied website on the first home buyers grant, some situations may still be unclear such as:
a. "If I paid stamp duty (duties) on a block of land in the past, and now looking at building a new home, will I qualify for the first home buyers grant? And could I claim a stamp duty rebate when building my first home?"
b."What if I purchased a subdividable block with a friend, and plan to build my first home after subdivision? Could I have my rate of duty reassessed as a first home owner? And could I claim a stamp duty rebate paid on the land?"
The short answer is "yes"...
...but you will need to check with the Department of Finance in your state. I sent the above questions to the Department of Finance in Western Australia. And I received a positive indication from a Senior Revenue Officer.
What I learned was that for a first home buyer looking to build, the First Home Owner Grant (FHOG) applies when you enter a building contract. Once approved for the FHOG, there's another application form called "Application for First Home Owner Rate of Duty". This is the elusive form that's not well publicised. It allows first home buyers who qualify, to get a stamp duty rebate on the block of land paid initially before entering into any building contract.
The steps to claim a stamp duty rebate on land as a first home buyer are:
- Pay the stamp duty on the land first. (If you haven't yet chosen a builder or entered into any building contract)
- Enter into a building contract and apply for the First Home Owner Grant (FHOG)
- Once the First Home Owner Grant (FHOG) is approved, complete the Application for First Home Owner Rate of Duty form by downloading it from the Department of Finance website (you can access the Application for First Home Owner Rate of Duty form for WA here)
- Submit the Application for First Home Owner Rate of Duty to the Office of State Revenue together with the duty endorsed agreement / sale contract for the vacant land that was previously duty assessed
- The duty would then be reassessed at the First Home Owner Rate of Duty
- Any excess duty would be refunded as a stamp duty rebate
Claiming Stamp Duty Rebate When Subdividing Land
Similar to the above, when you're a first home buyer purchasing a subdividable property with others (be it other first home buyers or otherwise), there's still an opportunity to have your duties paid reassessed and get a stamp duty rebate after entering into a building contract.
One important (and again little known) step when subdividing jointly owned property is the Partitioning of Property. This is where you only pay "nominal duty" (not full stamp duty but perhaps only $20). You can then transfer an equivalent or lesser value of the person's entitlement. For example, 3 friends purchased a triplex development site together. One party owned 34%, whilst the other 2 owned 33% of the property. Once subdivided into 3 lots, they could partition each of the lots into their individual names. This is rather than each owning one-third of each lot. Information for WA buyers on Partitioning of Property may be found here.
The Senior Revenue Officer from WA stated the following. For joint owners who paid duties, are subdividing and building their first home:
- there would be a reassessment of duty to the extent of the applicant who is the first home owner’s share in the initial property;
- once they have subdivided (and partitioned into individual names), and once entered into a building contract, they would
- apply for the FHOG and lodge their Application for First Home Owner Rate of Duty together with the original purchase contract.
Given the advantages for first home buyers to get:
a) the government grant for building a brand new first home, &
b) stamp duty rebate for land before entering a building contract
c) manufactured equity from subdividing and creating additional assets,
it makes a lot of financial sense for first home buyers to team up with others to buy, subdivide and build your first home. That way, they would make the most of government incentives and gain a stamp duty rebate. They would also have the flexibility to select an excellent location and even reap property development rewards too.
Don't know anyone qualified to buy a development site with? Register for free and get matched with like-minded buyers to divide and conquer together.