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Do first-time home loan applicants qualify for tax benefits?

Peter Terlato avatar
Peter Terlato
- 7 min read
Do first-time home loan applicants qualify for tax benefits?

If you’re a first-time home buyer applying for a home loan, you could qualify for some tax deductions, but the benefits you can receive are limited and you’ll need to meet some eligibility requirements.

If your property is a source of income you may be entitled to some tax rebates. For instance, if you rent out the property, you could claim tax deductions on the cost of construction or renovation, the loss in value of depreciating assets such as furniture or electrical fixtures, and your home loan interest

Homeowners using their property as a residence may also be able to claim tax deductions if a part or all of the home is used for business. These deductions include tax write-offs for depreciating assets and deductions for operating expenses, like utilities payments and service charges for phones and the internet. However, if you’re running a business from your residence you won’t qualify for a tax deduction on the interest paid on your home loan.

First home buyers in some states and territories may be entitled to full exemptions or concessions on stamp duty (transfer duty) when purchasing off-the-plan or established homes.

What is stamp duty?

Stamp duty is a tax charged by each of the state and territory governments in Australia whenever certain types of property (including real estate and motor vehicles) are sold. Sometimes called “transfer duty” or something similar, the tax helps cover the cost of transferring a property’s legal title from one owner to another.

Stamp duty is a one-off charge that you’ll need to pay when you purchase a property. In addition to the purchase price, it can significantly increase the upfront costs of buying real estate, which may also include home loan establishment fees, pest and building inspection fees, lenders mortgage insurance (LMI) and more.

Stamp duty abatements are state-based incentives, so let’s explore what each state and/or territory affords first home buyers.

New South Wales (NSW)

The First Home Buyers Assistance Scheme offers full stamp duty exemption on properties valued under $650,000 or concessional stamp duty charges on properties valued between $650,000 - $800,000.

First time buyers purchasing vacant land won’t pay stamp duty on land valued under $350,000. For land valued between $350,000 - $450,000, you’ll receive a concessional rate.

If you purchase an off-the-plan property that you intend to live in, you may defer stamp duty payment for up to 12 months after signing the agreement, or until the property is completed or handed over, whichever comes first.

The First Home Buyer Choice scheme allows owner-occupiers who buy a property, valued up to $1.5 million, to avoid lump sum stamp duty payments and instead pay an annual levy of $400 plus 0.3 per cent of the property’s land value.

Queensland (QLD)

The first home stamp duty concession is available to eligible buyers on homes valued under $550,000. You do not have to be an Australian citizen or permanent resident to claim a concession, but you must meet the eligibility criteria.

Eligible buyers can claim a first home vacant land concession on land valued less than $400,000. However, you must build your first home and move in within two years of settlement.

Victoria (VIC)

The First Home Owner Grant awards buyers full stamp duty exemption on established properties valued up to $600,000 or 50% off stamp duty on properties valued between $600,000 - $750,000.

If you’re a first home buyer and have a dependent child within 11 months of the contract of sale date, you may be able to apply for stamp duty exemption on properties under $150,000 or a concession on properties valued at $200,000 or less.

Stamp duty concessions on new or established properties valued up to $550,000 are available for all home buyers if the property becomes your principal place of residence (PPR) within 12 months of becoming entitled to possession and you live in the property for a continuous period of at least 12 months.

If you’re a first home buyer that qualifies for the first-home buyer duty exemption or concession or the PPR concession, you may be eligible for stamp duty concession on an off-the-plan property purchase if the dutiable value is less than $750,000. If you’re receiving a PPR concession the dutiable value of the property cannot exceed $550,000.

Eligible young farmers can receive a full exemption from stamp duty on farmland valued at no more than $600,000 or a concessional rate on farmland valued between $600,001 - $750,000. However, you must choose between the young farmers exemption/concession and the PPR concession, depending on whichever you calculate to be more valuable. If you don’t make a choice, you’ll automatically receive the PPR concession.

Western Australia (WA)

The First Home Owner Grant provides stamp duty concessions for eligible first home buyers on houses valued up to $530,000, or vacant land valued less than $400,000.

Tasmania (TAS)

Eligible first home buyers that purchase an established home with a dutiable value of $600,000 or less can receive a 50 per cent discount on stamp duty.

Australian Capital Territory (ACT)

While not specifically designed for first home buyers, eligible buyers can be exempt from stamp duty or pay a reduced amount if they haven’t owned a property in the past two years. If you purchase an eligible off-the-plan unit that’s valued at $500,000 or less, you’re exempt from paying stamp duty.

South Australia (SA)

There are no stamp duty exemptions or concessions for first home buyers. Stamp duty exemptions are only applicable in certain circumstances.

Northern Territory (NT)

There are no stamp duty exemptions or concessions for first home buyers. Stamp duty exemptions apply for eligible house and land package buyers.

First home super saver scheme

While not a tax exemption per say, the first home super saver (FHSS) scheme offers buyers the opportunity to save money for their first home through voluntary concessional (before-tax) and voluntary non-concessional (after-tax) contributions to their super fund.

When you’re ready to purchase your first home you can apply to release your voluntary contributions, along with associated earnings. However, you must meet the eligibility requirements for the successful release of these funds.

The FHSS scheme only applies to first home buyers that meet the following criteria:

  • You must never have owned property in Australia.
  • You have not made a previous FHSS release request.
  • You will occupy the premises you buy or intend to as soon as practicable.
  • You occupy the property for at least six months within the first 12 months, after it is practical to move in.

You can apply for a maximum of $15,000 worth of voluntary contributions from any one financial year, up to a total of $50,000 in contributions across all years. You’ll also receive an amount of earnings that relate to those contributions.

It’s important to note that you can only request a release under the FHSS scheme once and it may take between 15 and 20 business days to receive your money. You can make your release request within 14 days of signing a property contract. However, you must have a FHSS determination before you sign any property contract.

What else should you consider before buying your first property?

Stamp duty or an ongoing land tax are important budgetary considerations. It’s sensible for homebuyers, investors and refinancers to look beyond interest rates and compare all the features and benefits of a range of home loans.

One fast option for comparing home loan offers is to look at their Real Time Ratings™. These star ratings are based on a combination of each home loan’s cost and flexibility, and are updated daily to help improve their accuracy. To make things even simpler, RateCity’s home loan Leaderboards rank home loans in different categories, with the top-rated products potentially becoming eligible for consideration in RateCity’s Gold Awards.

Compare home loans in Australia

Product database updated 28 May, 2024

This article was reviewed by Personal Finance Editor Alex Ritchie before it was published as part of RateCity's Fact Check process.