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First Home Owners Amendment Bill 1990



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House: House of Representatives

Portfolio:Community Services and Health

Purpose

To provide that First Home Owners Scheme (FHOS) assistance will not be payable to applicants who contract to purchase or build, or commence construction of a house, after 21 August 1990. The Bill will also create offences for misleading statements made in relation to an application for FHOS assistance and for obtaining payment of FHOS assistance by means of impersonation or a fraudulent device.

Background

FHOS was introduced on 1 October 1983 to encourage and to assist first home buyers of low to moderate income into home ownership and to stimulate construction of new homes and to create jobs. In 1988-89, 36 235 applications for FHOS assistance were approved. Total approvals for FHOS assistance from October 1983 to 30 June 1989 was 333 631. 1 Of the 36 235 applications approved in 1988-89, 72% were from married (including de facto) couples and 42% of approved applicants had two or more dependent children. Of the 25 106 applicants with dependent children approved for assistance, 3236 were sole parent households, 2964 headed by women, and 272 headed by men. Of the married couples approved for FHOS assistance in 1988-89, 8.6% contracted for their homes within their first year of marriage, while 31% acquired their homes in their first three years of marriage, and 48% within five years of marriage. 2 Of the 36 235 FHOS approvals granted in 1988-89, 30% were aged 25 or less, and 58% were aged 30 or less. Total FHOS assistance expenditure for 1988-89 was $175.97 million, of which $88.2 million was for continuing payments to applicants approved prior to 1988-89, and $87.8 million for applicants approved in 1988-89. 3 As at 30 June 1989, approximately $1.27 billion had been paid out in assistance since the scheme's inception. Commonwealth outlays on FHOS in 1989-90 were $119.7 million, and are expected to decline to $68.3 million in 1990-91. 4

To qualify for FHOS assistance, applicants have to be buying or building (or have bought) their first home, satisfy an income test, and certain other eligibility criteria. The maximum benefit payable to a FHOS applicant depends on the number of children, the amount of taxable income and the payment option chosen. FHOS applicants have a choice of three forms of assistance: a monthly subsidy payment extending over five years; a lump sum payment combined with a smaller monthly subsidy than option 1 but also paid over five years; and a larger lump sum payment than in option 2 together with a smaller monthly subsidy (over five years) than either option 1 or option 2. Table 1 (see below) shows current income limits and the maximum level of assistance available under FHOS. Full assistance is paid to applicants whose incomes fall on or above the lower limit. Applicants whose incomes fall between the limits are eligible for a reduced benefit.

Table 1. 5

Dependent children Income range ($) Option 1 (subsidy) ($) Option 2 (lump sum + subsidy) ($) Option 3 (lump sum +subsidy) ($) 2 or more 26 000 - 34 000 5000 3300 + 1200 1750 + 2500 1 25 000 - 33 000 4500 3300 + 700 1750 + 2000 0 (joint applicant) 23 000 - 31 000 3000 n.a. n.a. 0 (sole applicant) 11 500 - 15 500 3000 n.a. n.a.

The decision to end FHOS assistance to applicants who contract to purchase or build, or commence construction of a home after 21 August 1990 was announced in the 1990-91 Budget. In the Treasurer's 1990-91 Budget Speech, the stated reason for the Government's decision was that `...given increasing disparities in home prices between cities, the (FHOS) is no longer proving an equitable way of assisting home buyers'. In the Second Reading Speech to this Bill, the stated reason given by the Minister for the Government's decision was `...to streamline the administration and remove the duplication in this area (i.e. of housing assistance)'.

No commitment is given in either the Treasurer's 1990-91 Budget Speech or the Minister Second Reading Speech to this Bill that the net savings to the Commonwealth resulting from the Government's decision (i.e. $33.4 million in 1990-91 and $61.8 million in 1991-92) 6 would be directed to housing assistance. However, both the Treasurer and the Minister did commit the Government to providing funds for additional deposit assistance for low income earners to be administered by the States. The Minister in the Second Reading Speech to this Bill states that funds will be provided to the States to `...link deposit assistance with existing home lending schemes' and that the `new arrangements will be administered directly by the State and Territory housing authorities...'. The Minister also said that the proposed deposit assistance arrangements are intended to operate from 1 January 1991 and the Government has committed the Commonwealth to provide $14 million for the 1990-91 financial years and $30 million in 1991-92 (i.e. just under half of each years savings) and that the new arrangements would be incorporated into the new Commonwealth/State Housing Agreement. Both the Treasurer and the Minister have stated that existing commitments under the FHOS will continue to be met.

The Government's decision has been described by the Housing Industry Association as leaving `...the Federal Government's home ownership policies threadbare'. In addition, the Association alleges that the Government decision has placed the responsibility of home ownership support at the doorstep of the States without providing effective or fair compensation. In support of this line of argument, the Association maintains that the States will have to `...foot the bill for the cost of administering a new deposit assistance scheme...' and that `...more than half of the Commonwealth's allocation to the States for deposit assistance will have to come out of the existing Mortgage and Rent Relief Scheme which in States is already fully committed' 7.

The Australian Democrat's have described the Government's decision as a `...miserly and mean-spirited decision...', and that the decision would `...make it even more difficult for low income earners trying to get their first home' 8.

Main Provisions

Clause 4 of the Bill will have effect from 22 August 1990 (clause 3).

Clause 4 provides that FHOS assistance will not be payable to applicants who contract to purchase or build, or commence construction of a dwelling, after 21 August 1990.

Clause 8 provides that it will be an offence to knowingly or recklessly make a misleading statement in relation to a FHOS application. The maximum penalty for a breach of this provision will be imprisonment for 6 months. It will also be an offence for a person to receive FHOS assistance by means of impersonation or a fraudulent device. The maximum penalty for a breach of this provision will be imprisonment for 12 months.

References

1. First Home Owners Scheme, Annual Report 1988-89, p. 2.

2. Ibid., pp. 2 and 3.

3. Ibid., p. 3.

4. Budget Statements 1990-91, Budget Paper No. 1, pp. 3.170 and 3.182.

5. First Home Owners Scheme, Annual Report 1988-89, p. 31.

6. Budget Statements 1990-91, Budget Paper No. 1, p. 3.172.

7. Housing Industry Association, Media Release, 22 August 1990.

8. Senator Vicki Bourne, News Release, 22 August 1990.

Bills Digest Service 23 August 1990

Parliamentary Research Service

For further information, if required, contact the Economics and Commerce Group on 06 2772460.

This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

Commonwealth of Australia 1990

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Published by the Department of the Parliamentary Library, 1990.