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1
First Home Owner Grant and Other Legislation
Amendment Bill 2001
FIRST HOME OWNER GRANT AND
OTHER LEGISLATION AMENDMENT
BILL 2001
EXPLANATORY NOTES
GENERAL OUTLINE
Policy Objectives
To amend the First Home Owner Grant Act 2000 to give effect to the
temporary extension of the First Home Owner Grant ("FHOG") Scheme on
and from 9 March 2001, and to amend the Gas Pipelines Access
(Queensland) Act 1998 to specify a further date for the lodgement of access
principles for the PNG to Queensland gas pipeline.
Reasons for the Bill
The amendments to the First Home Owner Grant Act 2000 are required
to give effect to the Commonwealth extension to the FHOG scheme for
new homes, including to ensure that the Office of State Revenue may
properly administer and enforce compliance with the eligibility criteria for
the scheme.
The amendment to the Gas Pipelines Access (Queensland) Act 1998 is
required to give the applicant for the PNG to Queensland gas pipeline
further time to lodge access principles for the pipeline under the process
already commenced under the Petroleum Act 1923.
Achievement of Objectives
First Home Owner Grant Act 2000
The Extended First Home Owner Grant
Under the First Home Owner Grant Act 2000, first home owners that
satisfy a number of criteria are entitled to the payment of a grant of $7,000.
The grant is intended to encourage and assist home ownership and offset
the effect of the goods and services tax on home ownership.
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First Home Owner Grant and Other Legislation
Amendment Bill 2001
On 9 March 2001, the Prime Minister announced that the grant under the
FHOG scheme would increase from $7,000 to $14,000 for first home
buyers who contract for the purchase or construction of a new home, and
owner builders who commence construction of a new home, on or after that
date, subject to a number of further criteria. The grant will remain at
$7,000 for other first home buyers. The increase in the grant is a short-term
measure that will end on 31 December 2001.
What is a new home?
A new home is a home that has not previously been sold or occupied as a
residence. This will include, for example, a commercial warehouse that
has been converted to residential premises, provided that the building has
not been occupied as a residence subsequent to conversion.
A home will also be considered to be a new home where the home is the
subject of a contract for its purchase, the sale is a taxable supply under
section 40-75(1)(b) of the A New Tax System (Goods and Services Tax) Act
1999 (Cwlth) on the basis that it is a sale of substantially renovated new
residential premises, and the home, in its renovated state, has not been
previously sold or occupied as a residence.
Example
A builder purchases an existing home which is then improved by
effecting substantial renovations, as defined in the A New Tax System
(Goods and Services Tax) Act 1999 (Cwlth). After completing the
renovations, the builder then sells the home to a first home owner.
Provided that the sale of the home is a taxable supply of new residential
premises under section 40-75(1)(b) of the A New Tax System (Goods and
Services Tax) Act 1999 (Cwlth), the home will be considered a new home.
Consequently, the first home owner may be eligible for the additional grant
on the purchase of the home, provided that all eligibility criteria are
satisfied.
Eligibility for the additional grant
To be eligible for the additional grant, a first home buyer must be eligible
for the existing grant and have executed a contract on or between 9 March
2001 and 31 December 2001 for the purchase or construction of a new
home. An applicant who does not satisfy the extended criteria may still be
eligible for the existing $7,000 grant.
Where a first home buyer contracts for the construction of a new home,
construction must commence within 16 weeks of the contract's execution
and the contract must specify that construction will be completed within 12
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First Home Owner Grant and Other Legislation
Amendment Bill 2001
months of the building work commencing. The Commissioner of Stamp
Duties may, however, extend the 16 weeks where appropriate and may pay
the grant where the contract does not specify a construction completion
date but construction is completed within the 12 months.
Owner builders eligible for the existing grant will be eligible for the
additional grant where constructing a new home and construction is
commenced on or between 9 March 2001 and 31 December 2001 and is
completed before 1 May 2003.
Contracts for the purchase of new homes "off the plan" will be eligible
for the additional grant where the contract is executed on or between 9
March 2001 and 31 December 2001 and it provides for completion of
construction before 1 May 2003. If the contract does not specify a
completion date, the grant may still be payable if construction is completed
within the required period.
However, where the purchase price of a home or the value of the
construction contract is less than $14,000, the applicant will be entitled to a
total grant equal to the value of the consideration. In the case of owner
builders, the consideration includes the purchase price of materials and the
value of any subcontracts for work but does not include the value of the
owner builder's labour.
There are cases where, following the announcement of the new scheme,
some home buyers cancelled contracts that had been entered into before 9
March 2001 and executed new contracts on the same or substantially
similar terms on or after 9 March 2001. In some cases, these home buyers
took advantage of "cooling off" arrangements under the original contracts
to cancel them in an attempt to qualify for the additional grant. As such
arrangements are contrary to the intention that the extended grant
encourage new home purchases from the announcement date, the First
Home Owner Grant and Other Legislation Amendment Bill 2001 will
ensure that these contracts are ineligible for the additional $7,000 grant.
Example
Mary and John Smith executed a contract on 8 March 2001 to have the
"Tuscan" home built on their land by XYZ Builders. Under the contract,
Mary and John have a "cooling off" period where they may reconsider
whether or not to proceed with the contract.
On 12 March 2001, Mary and John decide that they would rather build
the slightly more expensive "Morocco" house that XYZ Builders also
offers. This home is similar to the "Tuscan" home but has some enhanced
design features. They therefore cancel their original contract and execute
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First Home Owner Grant and Other Legislation
Amendment Bill 2001
a new contract on that date, intending to use the recently announced
additional $7,000 FHOG grant that is available for new home building
contracts executed on or after 9 March 2001.
However, as the contract in respect of which the FHOG application will
be made is one that has replaced a contract to build the same or a
substantially similar home and the original contract was made before 9
March 2001, Mary and John will be unable to make the necessary
declarations on the FHOG application form and will be ineligible for the
$14,000 grant. However, where the eligibility criteria for the current
FHOG grant are satisfied, they will be eligible for the $7,000 FHOG grant.
Gas Pipelines Access (Queensland) Act 1998
The Gas Pipelines Access (Queensland) Act 1998 provides for the
introduction of a national pipeline access regime administered by the
Australian Competition and Consumer Commission ("ACCC"). During the
formulation of this regime, applicants for the PNG to Queensland gas
pipeline commenced the procedure for the determination of access
principles under the Petroleum Act 1923. The procedure was similar to that
adopted under the national regime. Specific provisions were inserted in the
Gas Pipelines Access (Queensland) Act 1998 to recognise the procedure
undertaken under the Petroleum Act 1923. Once access principles are
approved under this procedure they are deemed to be approved under the
national regime.
The time for lodgement of the access principles is currently specified as
being 1 year after the commencement of the Gas Pipelines Access
(Queensland) Act 1998. This requires lodgement by 18 May 2001. Due to
a number of uncertainties with the PNG to Queensland gas project, the
pipeline applicants are unable to lodge final access principles for
consideration by the Minister by this date.
Alternatives to the Bill
First Home Owner Grant Act 2000
Eligibility for the extended FHOG scheme is dependent on eligibility for
the current grant. Further, the administrative arrangements for paying the
grant and ensuring compliance with scheme requirements will be the same
for both schemes. Although the scheme is being administered under an
administrative arrangement temporarily, enactment of legislation to give
proper effect to the scheme is required.
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First Home Owner Grant and Other Legislation
Amendment Bill 2001
Gas Pipelines Access (Queensland) Act 1998
If the pipeline applicant does not lodge access principles by 18 May
2001, the access principles would need to be approved under the national
regime. The process would therefore need to re-commence. It is estimated
that this would put the PNG to Queensland Gas pipeline back a further 2
years.
Estimated Cost for Government Implementation
First Home Owner Grant Act 2000
There will be additional costs involved in administering the additional
grant, including the cost of system upgrades, form redevelopment and
providing education on the additional grant to both financial institutions
and the public. However, these costs are not expected to be significant.
Gas Pipelines Access (Queensland) Act 1998
There will be no additional cost to the State associated with this
amendment.
Consistency with Fundamental Legislative Principles
Retrospective commencement of the legislation for the extended FHOG
scheme
The Prime Minister announced the proposal for extension of the FHOG
scheme on 9 March 2001, with the extension to take effect on and from that
date. As the legislation to give effect to the change could not be introduced
until later, the legislation will need to be retrospective.
The effect of the retrospectivity has been somewhat limited by the Prime
Minister's announcement on 9 March 2001 and the publication on 23
March 2001 of the key criteria for the additional grant by the
Commonwealth. There has also been media coverage of the new scheme
and applications have been lodged with, and processed by, the Office of
State Revenue on the basis of the new scheme requirements.
The Commonwealth has advised that the same rights and obligations are
to apply to the additional grant as for the existing grant. For this reason,
the same rights and obligations will be retrospectively applied to payments
of the additional grant made prior to enactment of the First Home Owner
Grant and Other Legislation Amendment Bill 2001.
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First Home Owner Grant and Other Legislation
Amendment Bill 2001
For example, where the additional grant has been paid to a first home
buyer in respect of a contract for the construction of a new home in
contemplation of the applicant taking up residence within 12 months of
completion of the transaction, the additional grant must be repaid where the
residence requirement is not satisfied.
Nevertheless, the provision of the additional grant is beneficial for new
home buyers and is not, therefore, considered to raise fundamental
legislative principle issues.
Other provisions
The remaining provisions of the First Home Owner Grant and Other
Legislation Amendment Bill 2001 are not considered to raise fundamental
legislative principle issues.
Consultation
First Home Owner Grant Act 2000
The proposal for temporary extension to the FHOG scheme was
announced by the Commonwealth. The key eligibility criteria for the
additional grant were developed by the Commonwealth in conjunction with
the States and Territories, following the Prime Minister's announcement on
9 March 2001. These criteria were published by the Commonwealth on 23
March 2001 and have been included on the Office of State Revenue's
website. In addition, brochures have been issued explaining the changes.
The assistance of financial institutions will be integral to the efficient
administration of the extended scheme. The Office of State Revenue is
working with these institutions to facilitate the administration of the new
scheme.
Gas Pipelines Access (Queensland) Act 1998
Consultation on the proposed amendment has been had with the
applicant for the PNG to Queensland gas pipeline, the participating
jurisdictions in the national gas pipeline access scheme and the ACCC.
NOTES ON PROVISIONS
Clause 1 cites the short title of this Act.
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First Home Owner Grant and Other Legislation
Amendment Bill 2001
Clause 2 provides that Parts 1 and 2, and the Schedule of the Act are
taken to have commenced on 9 March 2001.
Clause 3 provides that Part 2 of the Act amends the First Home Owner
Grant Act 2000.
Clause 4 inserts a new Division 5 in Part 3 of the Act, as follows.
Section 25A contains a definition of new home.
· Section 25B, in the form of a new definition of a special eligible
transaction, outlines the requirements that must be satisfied for a first
home owner grant applicant to be eligible for the $7,000 grant
increase for new homes. While the eligibility criteria for an eligible
transaction will continue to apply, further requirements will need to be
satisfied for an eligible transaction to be a special eligible transaction.
Contracts to purchase a new home "off the plan", as addressed in new
section 25B(2), are purchases of a new home prior to registration of a
plan of subdivision of the land on which the home is to be situated.
For example, this will include the purchase of a unit prior to
construction of the unit block but will not include a comprehensive
home building contract for the construction of a "spec home"
according to a predetermined standard plan. There are specific
construction completion requirements for these contracts.
In the case of contracts to build a new home, there are construction
commencement and completion requirements. Construction
completion requirements also apply to owner builders.
If the Commissioner is satisfied that a contract is part of a scheme to
avoid any limitations or requirements relating to the eligibility
requirements for a special eligible transaction, it will not be a special
eligible transaction. This does not preclude it being an eligible
transaction if the requirements for such a transaction are satisfied.
Unless satisfied to the contrary, a scheme will be presumed if a
contract which is made on or after 9 March 2001 replaces one made
before 9 March 2001 and the contract is one to purchase or build the
same or a substantially similar home.
· Section 25C specifies the amount of the grant for a special eligible
transaction. The section also ensures that, where the consideration for
a special eligible transaction is less than $14,000, the amount of the
first home owner grant for that transaction will be equal to the amount
of the consideration for the transaction. Section 20 will continue to
apply if an eligible transaction is not a special eligible transaction.
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First Home Owner Grant and Other Legislation
Amendment Bill 2001
For example, if the means by which a first home owner acquires a new
home constitutes a special eligible transaction, the maximum amount
of the first home owner grant that may be received by the first home
owner is $14,000. If the transaction is an eligible transaction but not a
special eligible transaction, the maximum amount the first home
owner may receive under section 20 is $7,000.
· Section 25D provides that the new Division 5 will expire on 31
December 2001.
Clause 5 inserts a new Part 7 in the Act. Part 7 contains new section 72,
which ensures that any rights, privileges or liabilities that would have
arisen under the new Part 3, Division 5 but for its repeal are not affected by
the repeal. For example, where an owner builder who is eligible for the
existing first home owner grant commences construction of a new home on
or between 9 March 2001 and 31 December 2001, the owner builder will
still be eligible for the additional $7,000 grant on completion, provided that
completion occurs before 1 May 2003. Similarly, rights of recovery and
investigation may be exercised by the Commissioner after the repeal date.
Clause 6 provides that Part 3 of the Act amends the Gas Pipelines Access
(Queensland) Act 1998.
Clause 7 amends section 59 of the Gas Pipelines Access (Queensland)
Act 1998 to specify the date for lodgement with the local Minister for
approval of access principles for the PNG to Queensland gas pipeline to be
1 December 2002.
The Schedule makes a minor amendment to section 3 and Schedule 1 of
the First Home Owner Grant Act 2000.
© State of Queensland 2001