What you need to know - Building Bonus (WA)
On 7 June the State Government initially announced the Building Bonus stimulus package and on 24 July 2020, the Department of Finance, RevenueWA released its guidelines on the State Building Bonus grants. The Federal Homebuilder stimulus package will operate in tandem with the State Building Bonus and the First Home Owner grant. This means that some eligible applicants will be able to benefit from each of the schemes.
Information about the Building Bonus grant are detailed below.
What is the Building Bonus stimulus package?
The Building Bonus is a time limited $20,000 grant for new home contracts to build on vacant land or purchase a new home being constructed under a single-tier strata plan.
Extension of rebates on existing duties
Rebates on transfer duty and foreign buyers duty paid are also available for owner-occupiers and investors who enter into:
- pre-construction contracts between 23 October 2019 and 23 October 2021 (inclusive) to purchase a new residential unit or apartment; or
- contracts signed between 4 June 2020 to 31 December 2020 to purchase a new unit or apartment under construction.
The rebate amount is 75% of the duty paid, capped at a maximum of $50,000 for the pre-construction contract and $25,000 for a contract under which construction has already commenced.
The rebate is not means tested or capped on the purchase price or value of the unit or apartment. Multiple rebates can be paid to the same applicant on separate transactions for the purchase of units or apartments in the same or different developments.
Rebates can be applied for within 12 months from the date the eligible applicant is registered on the certificate of title of the unit or apartment. Applications are made to the Office of State Revenue and the applicant will receive the rebate directly.
Eligible Home Owners
Q. Who is eligible for Building Bonus?
To be eligible for Building Bonus for a:
- new detached dwelling, your client must be the registered owner of vacant land on which the home will be built
- new home in a single-tier strata plan must be the registered owner of the land on which the new home is built and must be the buyer name in the off-the-plan contract or an eligible transferee.
An applicant can also be:
- An owner occupier
- Australian citizen
- Foreign person
- Corporation and trustees
There is no income or contract value cap for the Building Bonus and there is no requirement that the property be owner-occupied as a principal place of residence. Additionally, the applicant does not need to be living in WA to access the grant.
Q. What if the building contract is not in the name of the registered owner of the land?
In the event the building contract is not in the name of the registered owner evidence will be required which establishes that it is a bona fide arrangement.
Q. Are owner builders eligible for the grant?
Q. My client is an investor, are they eligible?
Eligible Building Work
Q. What type of work is eligible for Building Bonus?
To be eligible for Building Bonus, you must enter into a building contract between 4 June 2020 and 31 December 2020 to either:
- Build a new detached home on vacant land; or
- Purchase an off-the-plan contract to purchase a new home as part of a single-tier strata scheme.
Q. What is considered a ‘new detached home’ on vacant land?
A new detached home cannot:
- be for mixed use, commercial purposes or short stay accommodation; or
- share walls or roof structures with any other buildings.
Additionally, the land must be vacant or if there is a building on the land, will need to be demolished in order to be eligible.
Q. I build on spec, am I eligible?
Yes, as long as you satisfy the other requirements.
Q. I build granny flats, will my clients be eligible?
No, where there is already a home on the land, the building of a granny flat will not be eligible for Building Bonus.
Q. Can I use a cost plus contracts?
Other than existing state or territory requirements regarding cost plus contracts, as long as there is a comprehensive home building contract in place (and all the other criteria are satisfied) cost plus arrangements for the carrying out of residential building work are permitted.
Q. When does construction have to commence?
To be eligible, construction must commence within six months of the date of the building contract.
Construction commences when significant earthworks, excavations or physical building works commence. Prepatory work such as site clearing, fencing, markings, delivery of building products will not be considered to be commencement of construction.
Owner-builders however must actually commence construction of a new home on the land between 4 June 2020 and 31 December 2020.
If building a new home on a single-tier strata plan, there is provision to seek an extension from the Commissioner to extend the construction commencement date. Your application however must be supported by evidence detailing why construction did not commence within the required timeframe.
Q. What if I cannot commence work within 6 months?
If you know that you will be unable to commence construction within six months of the date of the building contract HIA suggests discussing the matter with your client and:
- consider entering into a preliminary agreement with your client.
A preliminary agreement or preparatory work agreements address preliminary or pre-construction works, for example obtaining a soil report and foundation data, or to develop design, plans and specifications for the construction or renovation of a home. Some may also ask for an initial fee. Please speak to your local Workplace Adviser for more information.
- Ask the client to wait to sign (and date) the building contract to ensure work can commence within 6 months.
If you are building a new home on a single-tier development, you may apply to the Commissioner to extend the construction commencement date beyond six months where the reasons for the delay are unforeseen and beyond the control of the parties to the contract. Examples of the criteria for exercising discretion includes, but is not limited to the following:
- delays in obtaining council approvals;
- difficulties in obtaining construction materials and/or sub-contractors;
- inclement weather, where the disruption is substantial;
- health problems relating to, or the death of, a person critical to the commencement of the project;
- significant delays in the issue of title cause by Landgate;
- prolonged industrial disputes;
- natural disasters.
The Commissioner is unlikely to exercise discretion
- if an applicant does not undertake appropriate due diligence when entering into a contract, or makes deliberate and informed choices which make them ineligible without the exercise of the Commissioner’s discretion;
- if delay results from the builder contracting to undertake more work than they could be reasonably expected to complete in the relevant timeframe;
- if construction is delayed because the land developer has set pre-development sales targets and insufficient blocks have been pre-sold in a subdivision; or
- for any other reason the Commissioner considers not unforeseen or beyond the control of the parties
Q. What if the building contract is dated before 4 June 2020?
Your client will not be eligible for Building Bonus.
Q. What should I do if my client wants to terminate and re-enter into a building contract after 4 June?
In the event your client terminates a building contract and subsequently re-enters into a building contract after 4 June 2020 and if the Commissioner is satisfied that this was for the purpose of qualifying for the grant, they will not qualify for the grant. Action could be taken against your client and any other parties for engaging in fraudulent conduct and penalties could be imposed.
Payment of the Building Bonus grant
Q. Who will make the payment?
The grant will be administered by the Department of Finance in WA.
Q. When can applications for the grant be lodged?
The grant for a new detached home can be applied for once the foundations have been laid. If a home is demolished, then an application can be made once demolition has been completed. The grant must be applied for by 30 June 2021.
The form is available here and must be lodged by 30 June 2021.
The grant for a new home on a single-tier strata plan however can only be applied for once construction has been completed and you are the registered owner of the property.
Access to other Government measures
Q. Can I access other pre-existing State and Territory programs?
Yes, Building Bonus is designed to complement existing First Home Owner Grant programs, stamp duty concessions and the Federal Homebuilder grant scheme, as well as the Commonwealth’s First Home Loan Deposit Scheme and First Home Super Saver Scheme.
Are there any penalties associated with the Building Bonus grant?
HIA understands that the revenue office of each of the States implementing the scheme will use existing mechanism to mitigate the changes of fraud occurring.
At this time, HIA is unaware of any specific penalty or anti-avoidance measures associated with the Building Bonus package.
The Government has released a Building Bonus information that may also be of assistance.
The joint application form for the client/s to complete is available here.
The client/s will have to provide information about their income, citizenship, certificate of title and building contract, or a copy of the sales contract for the purchase of an off the plan home/new home.
Contact a HIA Workplace Adviser on 1300 650 620 for further information and advice