Home buyers beat no-rent grant rule

By Lisa Pryor, Urban Affairs Reporter
January 17, 2005

A few first-home buyers who rented out their properties soon after buying have been allowed to keep their first-home owners' grant, despite it being intended for owner-occupiers rather than investors.

Some who spent only token amounts of time in their homes managed to fight off attempts by the Office of State Revenue to retrieve the funds.

But the success rate was low. Of 39 first-home buyers who appealed to the Administrative Decisions Tribunal in the two years to last June, only five were successful.

The Administrative Decisions Tribunal found that a first-home buyer, Justin St Baker, should be able to keep the $14,000 grant he used to buy an off-the-plan unit in Darlinghurst, even though he only lived in it for 10 weeks.

Earlier last year another man who bought a home in the Lake Macquarie suburb of Bluehaven was able to keep the grant even though he only lived in the property for a month before renting it out.

In both cases the properties were bought before last year. The law had since changed so that buyers must move into the property within a year of buying it and live there continuously for at least six months, said a spokesman for the NSW Treasurer, Michael Egan.

"Compliance audits by the Office of State Revenue indicated there were a number of cases where the grant had been paid but the applicant had occupied the property for only a very short period before renting it out," the spokesman said.

Buyers can claim $7000 when they buy their first home. Previously they could claim an additional $7000 for a newly built home. There is no asset or income test, but if the grant is claimed dishonestly the buyer risks not only losing the grant but paying a fine of the same amount.

The tribunal accepted that Mr St Baker had to move out of his apartment because his university commitments meant he had to give up work and devote himself to study, in a way he had not contemplated before he moved into the unit.

Before and after he lived in the unit it was rented out. Once he finished his exams he did not move back into the unit but returned to work in the US, where he could earn more than he could in Australia.

In the Bluehaven case, a Royal Australian Air Force employee, Trent McKellar, lived in his new home for a month before renting it out so he could move closer to Richmond, where he worked.

The tribunal found that Mr McKellar, who had moved items such as outdoor furniture, lawn mowers, clothes and a bed into the property, had occupied it sufficiently to obtain the grant. He also had utilities connected and told his bank he planned to live there.

The NSW Government said yesterday that its new stamp-duty payment to first-home buyers had exceeded the $276 million budget for the first year of the program.

With three months to go, the Government had already spent $284 million.