May 2013 Essential Update on First Home Owners Grant, Stamp Duty Discounts, Concessions, Exemptions and Savings

Summary

From 1 July 2013 First home buyers will receive $10,000 if they purchase a new home (off the plan, land and building, etc). First home buyers will be entitled to a 40% reduction on stamp duty (subject to eligibility – see below). The stamp duty reduction is a stamp duty concession which is on top of to the primary place of residence concession, if applicable. Click here for media release from the Premier’s Office.

First Home Buyers Grant
For newly built houses under $750,000, the First Home Owner Grant (FHOG) will increase from $7000 to $10,000 from 1 July 2013. The changes to the FHOG apply to first-time home buyers who sign an agreement to build or purchase a new home on or after 1 July 2013. Please note that you may still be eligible for the FHOG if you have previously purchased real estate but did not (1) previously receive the grant; and (2) did not live in that property as your principal place of residence (i.e. you purchased the property as an investment only).

According to the government’s statement, the existing FHOG for buying an established home will end on 1 July 2013. Buyers are required to sign a contract of sale prior to or on 30 June 2013 in order to receive the FHOG on an established home.

First Home Buyer Stamp Duty Reduction
For homes worth up to $600,000, whether established or newly constructed, the first home owner’s stamp duty reduction will increase to 40 per cent from 1 July 2013. For example, where full stamp duty is $20,000 then the concessional stamp duty will equate to $12,000 ($20,000 less $20,000 multiplied by 40/100).

Another 10 per cent duty reduction will be available for eligible first-time home buyers from 1 September 2014, which increases the overall stamp duty saving to 50 per cent.

Pensioner concession
Concession card holders (Pensioner Concession, Health Care, Repatriation Health and Commonwealth Seniors Health cards) may benefit from stamp duty concessions or even an exemption depending on the purchase price, among other things.

Off-the-Plan Sales concession
There is a concession offered, to buyers who purchase property “off-the-plan”. This is applicable to purchases of land, newly built apartments, townhouses, renovated lots and house and land building packages. They are titled off-the-plan as they purchases of property which have not been entered into the Land Titles Office’s register of land and property. Therefore purchasers of off-the-plan property are buying land and property according to the vendor’s drawn plans (which are intended to be registered in the future).

The concession is calculated using various formulas set by the State Revenue Office. It can be summarised as being calculated based on the renovation or construction cost, which take place after the day of signing the contract of sale and subtracting the cost of the renovation or construction from the purchase price. At the time of purchase the concession or stamp duty savings are estimates only. Estimates on stamp duty at the time of purchase can differ significantly to the actual stamp duty payable at the time of settlement.

Land and building package concession
A land and building package concession applies when a purchaser signs (1) a contract to purchase land and (2) a contract to construct a new building such as a house, apartment or townhouse. This differs to an off-the-plan sales concession as it can apply irrespective of whether the plan of the land and property is registered or not.

The concession applies to purchases of property within a multi-lot development (such as an apartment in a residential tower) or a single lot development (for instance a suburban house and land package)

The construction is assumed to be incomplete or it has not been started yet at the contract date.

Applying for the off-the-plan duty concession
For contracts signed on or after 1st October 2008 – In order to apply for the concession, the new SRO form must be completed which is available at this link: Duties Form 4A (Off the plan sales statutory declaration). This form is completed by the Vendor or the vendor’s conveyancer and provided a short time frame prior to settlement. For all the applications regarding land, renovated lots and building packages, this form can be used as long as the agreement is settled on or after 1 October 2008.

Today, the Reserve Bank of Australia has cut the cash rate interest rate by 25 basis points to 2.75% (1 basis point is 1 one hundredth of a per cent, or 0.01%).

Governor Glenn Stevens said ‘further decline in the cash rate was appropriate to encourage sustainable growth in the economy, consistent with achieving the inflation target’.

Find out what the Reserve Bank’s Cash Rate is, its purpose and how it is calculated in our blog post here

The Right to Cool Off in 2013 (Cooling Off Laws in Victoria)

Click Here For FAQs On Cooling Off Rights

Most of us are aware of the purchaser’s right to change their mind after signing a contract to purchase real estate (even if the vendor hasn’t signed anything to accept your offer). Although this is at odds with the basic principle of contract law it was nevertheless legislated to protect the consumer. This right to change one’s mind is popularly known as the “cooling off” right or the right to “cool off”. It should be noted that this rule is not without qualification. Here are the conditions which would allow a purchaser to cool off in Victoria (as per section 31 of the Sale of Land Act 1962)

Power of purchaser to terminate a contract for sale of land:

1. Must be a purchase of residential property*.
2. Right must be exercised within three clear business days <strong>after you sign</strong> (even if the vendor has not yet signed to accept the written offer).
3. Cannot be exercised if purchased at or within three business days before or after an auction.
4. If you have previously entered into a contract to purchase the same property.
5. If you are a real estate agent (or a real estate company).

*A purchase of commercial property is not protected. A corporate or company purchaser of residential real estate is still protected by the cooling off rights. Also note that as at the date of this post there is no cooling off right for vendors in Victoria.

The definition of three clear business days as interpreted by conveyancers is three full business days not including the day of sale. Obviously a business day is any day other than a weekend or a public holiday. The three days also do not include the day in which you signed. In other words, if you signed a contract on a Monday morning, then you would have until 5pm on Thursday to cool off.

New changes in 2012

Previously you could not exercise your right to “cool off” if you obtained independent legal advice before signing the contract. This changed on 30 March 2012. Even if you did receive independent legal advice, your right to end the contract within the three clear business days is no longer affected.

Penalty

It should also be noted that ending the contract after you have signed isn’t without cost. If you paid a deposit you are entitled to a refund. This refund however would have a penalty deducted from it. The penalty is either $100.00 or 0.2% of the purchase price, whichever is greater. It goes without saying that most likely the sum won’t be $100 given Australia’s current residential property prices.

Exercising the right

You must communicate your intention to cool off by delivering a written notice to the agent or the vendor at the address noted on the contract. Your notice ending the contract must be signed and delivered to the agent/vendor or left at their address for service under the contract (It is unclear whether email or fax is sufficient; to avoid doubt personal delivery is recommended). At what time does the cooling off period expire? There is no guidance in case law or legislation as to the deadline on the day of expiry. General practice suggests that the appropriate time is 5pm. Although some practitioners posit a deadline of midnight.

Complex situations

There may come a time when there is uncertainty as to whether the right to cool off still applies. This may occur in instances where:

1. the cooling off period of three clear business days has expired; and
2. the vendor has not accepted the purchaser’s offer; and
3. the vendor makes a counter offer in which the purchaser accepts.

In this scenario the cooling off period will commence from the day the purchaser accepts (both verbally and in writing) the vendor’s counter offer. The right to cool off is not excluded as the vendor did not accept the first offer from the purchaser. Where the vendor has not accepted the offer, there is no contract to found a right to cool off.

By default written offers expire after three (3) days. In other words, if the vendor has not accepted a buyer’s offer after three clear business days then the offer is withdrawn. We highly recommend prospective buyers to insert a two (2) day (or even one day) expiry time frame. This provides an added level of protection to the buyer in the event that: (1) the buyer wishes to end the contract under the cooling off provisions, but fails to do so within time or correctly; and (2) the vendor fails to accept the offer within the buyer’s offer deadline.

Have some conveyancing questions? Feel Free to Contact Us.

Frequently asked questions

Watch This Space – Online Conveyancing

We are very excited to announce the forthcoming launch of our Online Conveyancing Portal. We are investing heavily in increasing efficiency and convenience for everyone involved, real estate agents, clients, bankers, etc.

Update: The National e-Conveyancing network is fast becoming reality. The current online infrastructure and framework is being developed by National e-Conveyancing Development Limited (NEDCL). NEDCL will aid in the electronic lodgement of Land Title dealings, including registrations, transfers, discharges of mortgages, caveat lodgements and more. It is a platform to allow different accredited parties to complete document and monetary exchanges for property transactions. NEDCL is an online conveyancing facilitator between different stakeholders within the industry on a national level.

Provey is dedicated to updating its processes aligning itself with the NEDCL and the national electronic conveyancing framework.

Read more about what the Reserve Bank Interest Rate is, and how it is determined here.

What actually is the RBA’s interest rate?
The Rerserve Bank of Australia’s (RBA) announced interest rate are not anywhere near the amounts the banks charge for money they lend through home loans, personal loans, etc. So what is the RBA interest rate then then? To fully understand what the RBA’s interest rates figure is, an understanding of Australia’s “cash rate” is required (cash rate = RBA interest rate). The RBA’s website defines the cash rate as

So the target cash rate (and the RBA official interest rate) is the RBA’s ideal interest rate to implement monetary policy (that is to combat inflation and ensure sustainable economic growth). The target cash rate is exactly that, a target the RBA aims to achieve and works towards.

What is its purpose and role?
It is a form of policy to ensure inflation grows at a sustainable pace (inflation being a measure of the purchasing power of your money; i.e. the same good or service costing more in the future). The target cash rate can also be used, among other things, to incentivise growth and to boost consumer confidence.

How is the RBA’s interest rate (target cash rate) calculated?
How does the RBA achieve and influence the cash rate? The RBA does so by controlling the supply and circulation of funds (and securities also). The RBA controls the rate by actively trading; they buy or sell the securities and add or withdraw funds (money). With an understanding of simple economics and principles of supply and demand, one can appreciate that by withdrawing funds from circulation in Australia the RBA indirectly increases the cost to obtain it. In a nutshell, when the RBA wishes to increase the cash rate/interest rate they reduce the amount of money available to banks (withdraw funds). Banks of course lend out at a higher rate due to risk and profit goals, among other things.

Read more by visiting the RBA website on monetary policy.

Property Market & RBA Official Interest Rates in March 2012

The Reserve Bank of Australia (RBA) has announced a 50 basis points cut. For a $300,000.00 loan, the cut equates to $1,500 worth of interest savings per annum (provided the banks and lending institutions pass on the cuts). While the announcement was predominantly made to facilitate and premote recovery of Australia’s property market, much of this effort is dependant on whether retail banks actually pass on the cuts. As of the date of this article NAB and CBA have announced cuts, whether the others will follow only time will tell.

What actually is the RBA’s interest rate?
To fully understand what the RBA’s interest rates figure is, an understanding of Australia’s “cash rate” is required. The RBA’s website defines the cash rate as

So the target cash rate (and the RBA official interest rate) is the RBA’s ideal interest rate to implement monetary policy (that is to combat inflation and ensure sustainable economic growth).

How is the RBA’s interest rate (target cash rate) calculated?
How does the RBA achieve and influence the cash rate? The RBA does so by controlling the supply and circulation of funds (and securities also). The RBA controls the rate by actively trading; they buy or sell the securities and add or withdraw funds (money). With an understanding of simple economics, that is supply and demand, one can appreciate that by withdrawing funds from circulation the RBA indirectly increases the cost to obtain it. In a nutshell, when the RBA wishes to increase the cash rate/interest rate they reduce the amount of money available to banks (withdraw funds). Of course there are other influencing factors. Banks source their funds through other means as well (offshore) and this is their arguement against not passing on rates cuts.

Read more by visiting the RBA website on monetary policy.