The Government has updated the Superannuation Guarantee regulations in relations to Jobkeeper payments.  These changes provide clarity for employers in regards to how they calculated superannuation guarantee payments for employees receiving Jobkeeper.

Key facts on Jobkeeper superannuation guarantee changes

The changes to the Superannuation Guarantee (Administration) Regulations 2018 to ensure that:

  • employers are not required to make superannuation guarantee contributions in respect of amounts paid to employees to satisfy the wage condition under the Jobkeeper Scheme, but which do not relate to the performance of work;
  • if the amount of salary or wages for a calendar month remaining after reduction by the excluded amounts of salary and wages is less than $450, the remaining amount is excluded salary or wages for the purposes of calculating the minimum superannuation contribution for that employee.

These changes exclude from ‘salary and wages’ for the purposes of calculating the employer’s superannuation guarantee (SG) shortfall, amounts that are paid to an employee to satisfy the ‘wage condition’ under the Jobkeeper Scheme to the extent that such payments exceed payments for the performance of work. Payments made to satisfy the wages condition would otherwise be considered salary or wages and ordinary times earnings.

The following examples best illustrate how these changes work.

Example: Employee’s salary or wages do not exceed the amount required to be paid for the performance of work

Liz is a full-time employee who usually earns $3,000 per fortnight. As a result of the Coronavirus, her employer issues a Jobkeeper enabling stand down direction and reduces her hours of work. She now earns $2,000 per fortnight for the performance of work. Liz’s employer is entitled to Jobkeeper payments for her.

During the Jobkeeper fortnight beginning on 25 May 2020, Liz takes five days of personal leave at full-pay. Her employer pays her $2,000 for that fortnight: $1,000 for the days she worked, and $1,000 in relation to the taking of personal leave.
Liz’s salary or wages and ordinary time earnings for the fortnight are $2,000.

The Regulations do not apply as the salary or wages paid to Liz do not exceed the amount required to be paid to her for the performance of work.

The minimum superannuation contribution her employer must make to avoid a SG charge liability for the relevant quarter is 9.5 per cent of Liz’s ordinary time earnings. Her ordinary time earnings will include the $2,000 she was paid in respect of the fortnight.

Superannuation Guarantee amount payable: $2,000 x 9.5% = $190

Example: Employee’s earnings for the performance of work are less than $1,500 per fortnight

Rachael is a part-time employee who continues to earn her usual wages of $1,000 per fortnight. To satisfy the wage condition for Jobkeeper payment for Rachael, her employer pays her an additional $500 per fortnight so that she is paid a total of $1,500 per fortnight. Rachael’s employer is entitled to Jobkeeper payments for her.

The additional payment of $500 is excluded from being salary or wages because it is paid by Rachael’s employer for the purpose of satisfying the wage condition and is not paid to Rachael for the performance of work. Therefore, Rachael’s salary or wages and ordinary time earnings for the fortnight are $1,000.

The minimum superannuation contribution her employer must make in order to avoid a liability to SG charge for the relevant quarter is 9.5 per cent of Racheal’s ordinary time earnings. Her ordinary time earnings will include the $1,000 she was paid in respect of the fortnight.

Superannuation Guarantee amount payable: $1,000 x 9.5% = $95

Example: Employee stood down and employer not entitled to Jobkeeper

Erin is a long term casual employee who was earning approximately $1,750 per fortnight. As a result of the Coronavirus, she has been stood down by her employer. Her employer has a reasonable expectation of participating in the Jobkeeper Scheme and satisfies the wage condition in respect of Erin by paying her $1,500 for the first Jobkeeper fortnight.

After making the payment to Erin, her employer discovers that they are not entitled to Jobkeeper payment for Erin under the Jobkeeper Rules.

However, the Regulations still apply as the payment of $1,500 is considered salary or wages paid to Erin in respect of a Jobkeeper fortnight.

As Erin remains stood down, the entire amount is excluded from being salary or wages as it is paid by her employer for the purpose of satisfying the wage condition and is not paid to Erin for the performance of work.

Therefore, Erin’s salary or wages and ordinary time earnings for the fortnight are nil. This means her employer is not required to make a superannuation contribution in respect of Erin for the fortnight in order to avoid a liability to SG charge.

Superannuation Guarantee amount payable: Nil

Example: Employee’s earnings for the performance of work are less than $450 for a calendar month

Nelson is a long term casual employee who earns $400 in April 2020 for the performance of work. To satisfy the wage condition for Jobkeeper payment for Nelson, his employer pays him $400 for the month, plus an additional $2,600, totalling $3,000 before tax for that month.

Nelson’s employer is entitled to Jobkeeper payments for him.

The additional payment of $2,600 is excluded from being salary or wages because it is not an amount that is required to be paid to Nelson for the performance of work.

The remaining $400 is also excluded from being salary or wages under new s. 12A(3) of the SGA Regs because his earnings in relation to the performance of work during the calendar month are less than $450.

Therefore, Nelson’s salary or wages and ordinary time earnings for the month of April are nil. This means his employer is not required to make a superannuation contribution in respect of Nelson for that month in order to avoid a liability to SG charge.

Superannuation Guarantee amount payable: Nil

The Explanatory Statement is available here.

Processing Jobkeeper and Superannuation payments through Xero payroll

Although the above intricacies of how superannuation and Jobkeeper payments work together can be complex, fortunately for employers using Xero as their payroll system ensuring the correct payments are made to employees is simplified.

If you have any questions regarding how to calculate superannuation guarantee payments for employees receiving Jobkeeper, please contact your Quill Relationship manager or contact us if you need assistance with your business accounting or payroll needs.

Updated Frequently Asked Questions (FAQs) have been released by Treasury in relation to the $25,000 HomeBuilder Grant for construction and renovation.

The HomeBuilder Grant is being implemented through a National Partnership Agreement. As of 2 July 2020, all States and Territories have signed up to the HomeBuilder National Partnership Agreement.

Further detail on eligibility and how to apply will be made available through the relevant State or Territory Revenue Office. State and Territory contact information can be found on the Treasury HomeBuilder website.

Please note: The information within this article is directly from the HomeBuilder FAQ Fact Sheet (23 July 2020) provided by the Australian Government.  This information overrides and supersedes any other content we’ve previously published on our website including our article: HomeBuilder $25,000 Grant Eligibility for Building and Renovation published 19/06/2020

HOMEBUILDER GRANT APPLICATION PROCESS

How do I apply for the HomeBuilder Grant?

View updated HomeBuilder Grant Applications State by State as at 11 August 2020 below.

You will be able to apply through your relevant State or Territory Revenue Office. Application forms are being developed and are expected to be available on the website of each Revenue Office soon. Online customer portals are also being developed and will be used by most jurisdictions to allow you to lodge your application and supporting documentation directly with the relevant Revenue Office. It is expected that the online portals will be available in the coming weeks and you should regularly check the website of the relevant Revenue Office for further information.

When should I apply?

Applications for the HomeBuilder Grant must be received no later than 31 December 2020. It is strongly recommended that you submit your application with all supporting documentation to enable the relevant Revenue Office to process it.

Applications for the HomeBuilder Grant will open in the coming weeks. However, there may be some differences between the jurisdictions, and you should regularly check the website of the relevant Revenue Office for further information.

When will the HomeBuilder Grant be paid?

Payment of the HomeBuilder Grant depends on whether your application relates to a new build, substantial renovation or off-the plan / new home purchase:

  • New builds – grants will be paid after construction has commenced and the first progress payment has been made to your
  • Substantial renovations – grants will be paid after construction has commenced and at least $150,000 of the contract price has been paid in respect of the
  • For off-the-plan / new home purchases – grants will be paid after the applicant(s) name is registered on

In Tasmania, the timing of the grant payment may be different in certain circumstances and you should refer to the State Revenue Office of Tasmania website for further information.

Will the grant be pre-approved?

No, payment of the HomeBuilder Grant will not occur until after construction has commenced and once the first progress payment (for new builds), or at least $150,000 of the contract price (for substantial renovations) has been made. For off-the-plan / new home purchases, the grant will be paid after the applicant(s) name is registered on title.

In Tasmania, the timing of the grant payment may be different in certain circumstances and you should refer to the State Revenue Office of Tasmania website for further information.

How long will it take for my application to be processed?

The fastest way to have your application processed is to provide all necessary supporting documentation at the time you lodge your application. Your supporting documents need to demonstrate that you meet all eligibility criteria. The time it takes each Revenue Office to process your claim will also depend on the volume of applications received.

Who pays HomeBuilder Grant and who receives it?

It is expected that the relevant State or Territory Revenue Office will distribute the $25,000 grant directly to the applicant.

Is the HomeBuilder Grant taxed?

No – HomeBuilder will not be taxed in the hands of the owner-occupier. This is consistent with the existing State and Territory First Home Owner Grant program.

What documentation will I need to provide?

The State or Territory Revenue Office will require certain documents to process your application.

More information on the documentation you will need to provide will become available through the relevant State or Territory Revenue Office.

What proof do I need to provide to show that I reside or intend to reside at the property?

This will be determined by the relevant State or Territory Revenue Office.

What happens if there is a change in circumstance and I’m no longer eligible?

If your circumstances change after you have applied for HomeBuilder but have not yet received the payment, and no longer meet the eligibility criteria, you will need to notify your State or Territory Revenue Office immediately.

$25,000 HOMEBUILDER GRANT ELIGIBILITY CRITERIA

Who can apply for the HomeBuilder Grant?

To access HomeBuilder, owner/occupier applicants must:

$125,000 per annum for an individual applicant based on their 2018-19 taxable income or later; or $200,000 per annum for a couple based on their combined 2018-19 taxable income or later.

Enter into a contract from 4 June 2020 up to 31 December 2020 to:

  • build a new home as a principal place of residence, where the property value (i.e. house and land) does not exceed $750,000;
  • substantially renovate an existing home as a principal place of residence, where the renovation contract is greater than $150,000 and does not exceed $750,000, and where the value of the existing property (i.e. house and land, before renovation) does not exceed $1.5 million; or
  • purchase an off-the-plan / new home as a principal place of residence where the contract price does not exceed $750,000 and construction had not commenced prior to 4 June 2020

What is an owner-occupier?

An owner-occupier is the registered proprietor of the land at which they reside (and this property is their principal place of residency). The owner-occupier must also be a natural person (not a company or trust) and must also meet the other eligibility criteria of the program.

Does/do the applicant/s have to be listed on the certificate of title?

The applicant(s) must be listed on the certificate of title for the property.

What happens if more than one person is listed on the certificate of title?

If more than one person is listed on the certificate of title they must jointly apply for the HomeBuilder grant as a couple (provided they meet the definition of a ‘couple’ in their State or Territory – please see FAQ below). A property is only eligible for one HomeBuilder grant.

What is the definition of ‘couple’?

This will be determined by the relevant State or Territory authority. Generally, and as implemented under the Commonwealth’s First Home Loan Deposit Scheme, this would include couples that are legally married, in a registered domestic relationship or those living as a couple on a genuine domestic basis. However, advice on this should be sought from your relevant State or Territory authority.

My partner and I jointly own our home. I am an Australian citizen but my partner is not. Are we eligible for the HomeBuilder Grant?

No. If two people are listed on the certificate of title they must apply for HomeBuilder as a couple, and both applicants must meet the eligibility criteria of the program. The HomeBuilder program is only open to Australian citizens.

One possible option that may be available to couples in this situation is for the non-citizen partner to transfer for their title ownership to their spouse.  Although this will require a lender that will enable the mortgage to be joint but the security to be with only a single member of the couple, meaning a re-finance may also be required.

In addition if transferring a % of the title, stamp duty will likely apply in most States, however depending on the value of the property or land, and whether any concessions are available, the amount of stamp/transfer duty may be significantly less compared to the $25,000 grant.

How will my income be assessed?

The income caps will be assessed against your taxable income and based on your 2018-19 or 2019-20 Australian tax return (it is at the applicant’s discretion to determine which tax return to include as part of the application process). HomeBuilder is subject to the following two income caps:

  • $125,000 per annum for an individual applicant based on your 2018-19 taxable income or later; or
  • $200,000 per annum for a couple based on both 2018-19 taxable income or

How do I prove my taxable income?

Taxable income is shown on your notice of assessment. The notice of assessment is issued by the Australian Taxation Office once your tax return for an income year is processed and this can be used to demonstrate your taxable income.

Note: Taxable income is your gross income less allowable deductions and represents the amount of income you pay tax on. More information on taxable income can be found at https://www.ato.gov.au/Individuals/Lodging-your-tax-return/In-detail/What-is-income-/#Taxableincome.

What if I don’t lodge an income tax return?

If you didn’t earn any income or you earned below the tax free threshold you may be able to lodge a ‘nil tax return’ or a ‘non lodgement advice’ to the Australian Taxation Office. Evidence of a nil tax return or

non-lodgement advice is appropriate evidence of your income in the relevant financial year. Additional information on requirements for lodging a tax return is available on the Australian Taxation Office website.

Does the tax return have to match the name on the building contract and land title?

Yes, the applicant(s) must be the person(s) who is/are listed on the certificate of title of the property, and the notice of assessment.

Is there a limit to how many people can access HomeBuilder?

HomeBuilder is an uncapped, time-limited grant for any Australian citizen(s) who meet(s) the eligibility criteria. However, an applicant can only receive the HomeBuilder grant once and a property is only eligible for one HomeBuilder grant.

Can I apply for both the HomeBuilder grant and other housing grants offered by my State?

Your eligibility for other home buyer grants and programs will not affect your eligibility for HomeBuilder.

I am not a first home buyer – can I access HomeBuilder?

Yes. Provided you meet the eligibility criteria, you can apply for HomeBuilder. However, HomeBuilder is not available for investment properties or to owner-builders.

How is “principal place of residency” defined?

This will be determined by the relevant State or Territory Revenue Office.

ELIGIBILITY CRITERIA – CONTRACTS

What is the contract price cap (for new builds and renovations)?

A national dwelling price cap of $750,000 will apply for new home builds. This means that the value of new builds (house and land), house and land packages, and off-the-plan / new home purchases must not exceed

$750,000 to be eligible for HomeBuilder.

For renovations, a building contract price range of between $150,000 and $750,000 will apply and the total value of your property before renovation must not exceed $1.5 million.

What type of contracts are eligible under HomeBuilder?

HomeBuilder is available for contracts signed between 4 June 2020 and 31 December 2020 (inclusive). For new builds and substantial renovations, the relevant contract is the building contract.

For developer projects, including off-the-plan builds, the contract is the sales contract, where construction commences on or after 4 June 2020.

What is meant by “commencement of construction”?

When construction is considered to have commenced will depend on the type of contract that you enter into, and the State in which you are applying for HomeBuilder:

For new builds, commencement of construction in some jurisdictions will be as early as excavation; in other jurisdictions commencement occurs at the point of laying the slab.

  • In the Australian Capital Territory, commencement of construction means substantial earthworks, excavations, demolition and physical building work.
  • In South Australia, construction is taken to have commenced when site works including excavation for the approved building works to the top of the base level is complete.
  • In Tasmania, construction is taken to have commenced when laying of the foundation is complete.

Other States will provide further guidance shortly. For a substantial renovation, commencement of construction is when the works under the renovation contract commence. For an off-the-plan build, commencement of construction may be site preparation stage (including excavation of the site) or the laying of the foundations or laying of a slab for a carpark (whichever is earlier).For further information, please contact your State or Territory Revenue Office.

What happens if construction is delayed due to an issue with finalising financing or development approvals? Can I apply for an extension?

Construction pursuant to the contract must commence within three months of the contract date. A maximum extension of an additional three months may be provided by States and Territories on a case-by- case basis where the relevant Revenue Office is satisfied that the delay in commencement of construction is due to unforeseen factors outside the control of the parties to the contract (e.g. building or planning approvals). Applications will be considered on a case-by-case basis and the discretion will only be exercised where the relevant authority (usually the State or Territory Revenue Office Commissioner) is satisfied with the merit and integrity of the application for an extension.

How are timing delays associated with acquiring new land for construction mitigated in HomeBuilder?

Expediting land acquisition for new construction projects is a matter for States and Territories. HomeBuilder has been put in place to help stimulate the residential construction sector in light of the sharp decline in activity in the construction pipeline from the third quarter 2020.

What is the definition of an owner-builder?

A licensed or registered builder cannot undertake building or substantial renovation work on their own property. An owner-builder is intended to mean a person who is the registered or licensed builder and who takes legal responsibility for domestic building work carried out on their own land/property.

My mother’s cousin is a builder. Can they help me build my new house under HomeBuilder?

It is expected that, in negotiating the contract, the parties must deal with each other at arm’s length. This means the contract must be made by two parties acting freely and independently of each other, and without offering favour for some special relationship, such as being a relative. The terms of the contract should be commercially reasonable and the contract price should not be inflated compared to the fair market price. The State or Territory Revenue Office may require certain documents to process your application in this regard.

NEW BUILDS

What types of dwellings are eligible under the HomeBuilder Grant?

All dwelling types (house, apartment, house and land package, off-the-plan, etc.) are eligible under HomeBuilder, in accordance with the requirement that the owner-occupier must contract to build a new dwelling or substantially renovate their existing dwelling. The applicant must also meet the eligibility requirements outlined above.

I already own land but haven’t signed a contract to build a new house – am I still eligible?

Yes, if you meet the following criteria:

  • If you own a property (house and land), and knock the house down to rebuild – this will be counted as a substantial renovation, and therefore subject to the renovation price range of $150,000 to

$750,000 provided the value of the existing property (i.e. house and land, before renovation) does not exceed $1.5 million;

  • If you own vacant land before 4 June 2020, and then build a new home, the total value of the land and new build cannot exceed $750,000; or
  • If you buy the land after announcement, and then build a new home, the total value of the land and new build cannot exceed $750,000.

I want to build a new home in a land lease community or retirement village. Is my property eligible for the HomeBuilder Grant?

HomeBuilder is not intended for properties where the applicant does not own the property (both dwelling and land) – such as where a tenant lives at a property owned by somebody else, or where a person lives in a dwelling that they own and that is situated on land owned by somebody else (such as in land-lease communities). To be eligible for HomeBuilder, the eligible owner-occupier(s) must be listed on the property’s certificate of title. The owner-occupier must also be a natural person (not a company or trust) and meet the other eligibility criteria of the program.

What if I want to buy a recently built home that has never been lived in before? (E.g. spec build)

HomeBuilder is intended to support activity and provide a pipeline of work for the residential construction sector in the second half of 2020. An existing home that has already been completed, or started construction before 4 June, does not qualify for HomeBuilder.

However, where construction commences on or after 4 June 2020 and no later than three months after the contract is signed and provided the contract is signed between 4 June 2020 and 31 December 2020, then a HomeBuilder grant may be payable.

Are off-the-plan apartments or townhouses eligible for the HomeBuilder Grant?

Off-the-plan apartments or town houses are eligible for HomeBuilder.

If you sign the sales contract to buy the off-the-plan dwelling between 4 June 2020 and 31 December 2020 (inclusive) and construction commences on or after 4 June 2020 and no later than three months after the contract is signed, then the property purchase may be eligible for HomeBuilder.

However, if you sign the contract to buy the dwelling after 4 June 2020, and construction on the dwelling commenced before 4 June 2020, then it does not qualify for HomeBuilder.

SUBSTANTIAL RENOVATIONS

What renovations are eligible for the $25,000 HomeBuilder Grant?

To be eligible for HomeBuilder, renovations must substantially alter the existing dwelling, and:

  • the renovation contract must be between $150,000 and $750,000,
  • the value of your existing property (i.e. house and land, before renovation) must not exceed $1.5 million.

To be substantial, the renovation need not involve removal or replacement of foundations, external walls, interior supporting walls, floors, roof or staircases. However, it should improve the accessibility or safety or liveability of the property. How accessibility and liveability requirements are assessed for renovations is a matter for States and Territories.

Examples of works that would not qualify include: standalone granny flats, swimming pools, tennis courts, and structures that are not connected to the property (i.e. outdoor spas and saunas, sheds or standalone garages).

 

What if a renovation contract includes works that are eligible and ineligible? E.g. the contract covers eligible substantial renovations to the existing dwelling and ineligible landscaping and outdoor works?

The State or Territory Revenue Office must be satisfied that at least $150,000 worth of renovations is being used to improve the accessibility or safety or liveability of the dwelling.

Is landscaping considered a substantial renovation?

Substantial renovations are not expected to include renovations that are primarily cosmetic in purpose, such as landscaping. A renovation must substantially alter the existing dwelling (please refer to the FAQ ‘What renovations are eligible?’).

What happens if an applicant has multiple contracts for renovations (totaling more than $150,000)?

HomeBuilder can only be used for one contract per applicant. For renovations, the building contract must be valued between $150,000 and $750,000.

How will the $1.5 million value be assessed for substantial renovations?

Documentation to demonstrate the value of your property is a matter for the relevant State or Territory Revenue Office. States and Territories may consider evidence such as a recent contract of sale for the property, a rates notice that identifies the Capital Improved Value, or a bank or independent valuation. For further information, please contact your State or Territory Revenue Office.

Are knock-down rebuilds considered “renovations” under the HomeBuilder Grant?

Knock-down rebuilds are considered substantial renovations for the purposes of HomeBuilder.

I would like to renovate my investment property – would it be eligible for HomeBuilder?

Investment properties are not eligible for HomeBuilder. However, if you move into the property as your principal place of residence immediately following the renovation and satisfy all of the eligibility criteria, you may receive the grant.

What if I renovate my house and then want to sell? Is there a limit on how long I need to live there?

Yes. In determining whether a property is an applicant’s principal place of residence, the applicant(s) will be required to reside in the property for a minimum of six months from when the certificate of occupancy or final inspection certificate is issued (for new builds), the substantial renovations are completed or from when registered on title (for off-the-plan / new home purchases).

Are granny flats eligible for the HomeBuilder Grant?

Standalone granny flats are not eligible for HomeBuilder. For more information, please refer to the FAQ ‘What renovations are eligible?’

INTEGRITY MEASURES

What integrity measures is the Government implementing?

HomeBuilder eligibility criteria have been carefully designed to maximise support for the residential construction sector, ensure integrity, and manage demand for the program – which is uncapped and demand driven. To reduce complexity, income caps align with the Commonwealth Government’s First Home Loan Deposit Scheme and the national dwelling price cap aligns with the existing State and Territory First Home Owner Grant programs.

Owner-builders and those seeking to build a new home or renovate an investment property are ineligible for HomeBuilder. This is an important integrity measure to ensure that HomeBuilder only supports high quality, safe construction by a licensed or registered builder (depending on the State or Territory) that is at arm’s length to the buyer, and to maximise the impact on employment in the residential construction sector as it recovers from the coronavirus crisis.

The renovation works must be to improve the accessibility or safety or liveability of the dwelling. It cannot be for standalone granny flats, swimming pools, tennis courts, and structures that are not connected to the property (i.e. outdoor spas and saunas, sheds or standalone garages).

In addition, any building contract entered into must be at arm’s length. This means the contract must be made by two parties independently of each other and without some special relationship, such as being a relative. The terms of the contract should be commercially reasonable and the contract price should not be inflated compared to the fair market price.

The following is from Chris Lioutas from Insight Investment Consultants who sits on the Quill Group Investment Committee.  Although relatively technical in nature, we thought it was worthwhile sharing his commentary on where markets are at currently and what headwinds they are facing.

Markets

  • Local and global equity markets fell this week on continued concerns regarding rising virus cases and potential further lockdown measures.
  • US S&P 500 companies slashed or suspended over $40bn in dividends in the 2nd quarter, the deepest quarterly drop since 2009. In contrast, the US tech-heavy NASDAQ index rose to all-time highs whilst the S&P 500 is up more than 40% from its March lows.
  • Chinese equity markets rose very strongly this week on a wave of retail investor buying following a government directive encouraging the need to foster a healthy bull market in domestic stocks.
  • In local stock news, the banks announced they would be extending their deferral of mortgage repayments by another 4 months. Hardly surprising given pressure from the government, given no banks wants to take residential property onto their balance sheet, and given banks make money as long as there is a customer with a loan accruing interest.

Economics

  • The RBA kept rates on hold at their historic low of 0.25%, pledging their continued support and maintaining that fiscal and monetary support will be required for some time.
  • More than 1 million Australians have lost their jobs since the start of the virus and 10% of the labour force are working less hours than they wish. That means that 3.45 million workers are unemployed and underemployed, which represents almost a quarter of the total workforce. PM Morrison will have no choice but to extend virus stimulus measures.
  • Australian private sector credit growth fell for the first time since 2011 with a contraction in May. Business loans, personal loans, and investor housing loans all fell, whilst owner-occupier loans continued to grow steadily.
  • The value of Australian lending for housing excluding refinancing fell 11.6% in May, whilst refinancing was activity was strong as borrowers locked in low fixed rates. The value of lending was down sharply for both owner-occupiers and investors.
  • Sydney’s rental market has recorded its steepest quarterly decline in 15 years, with median rents falling 3.8%, with tenants seeing the lowest rental prices in 5 years. About 30% of all properties listed for rent have reduced rents in the past 30 days. More than 22,000 rental properties lay empty across the city, with declines in immigration and foreign students hurting the most.
  • Data showed a record rebound in Eurozone retail sales in May, whilst unexpected growth in the US services sector last month, which surged to pre-Covid levels, further bolstered sentiment.
  • The European Commission is forecasting a contraction of 8.7% in economic growth before a rise of 6.1% in 2021, worse than its previous forecast.
  • A private survey showed that China’s services sector expanded at the fastest pace in over a decade in June as the easing of lockdown measures saw consumer demand recover. However, companies continue to shed jobs.

Politics:

  • With virus cases rising in the US, particularly in Texas, Florida, and California, over 40% of the US has now reversed or delayed reopening measures. Whilst cases are rising, there has only been a very slight uptick in death rates. Time will tell whether increase in cases translates into a spike in deaths. At this stage, that looks unlikely given hospitals are better prepared, treatments are now available, and the predominance of new cases has come from those aged 20-39 with more testing.
  • Australia has formally suspended its extradition agreement with Hong Kong and the Chinese authorities. Prime Minister Scott Morrison said that new national security laws brought in by China represented a fundamental change. He also addressed that Australia would be willing to accept Hong Kong citizens looking to relocate to another country. Temporary visa holders in Australia will be granted an additional 5 years on their visas.
  • The NSW-Victoria border closed following a spike in cases in Victoria which has seen the state go back into lockdown for 6 weeks, possibly longer. The border closure is being handled by NSW. The NSW Premier took the opportunity to tell other states to open their borders in the national interest, with NSW given the action NSW is now taking to protect itself and the rest of the states.
  • Prime Minister Scott Morrison has flagged another round of stimulus measures ahead of September’s fiscal cliff, with the government looking at extending a modified form of JobKeeper as well as bringing forward tax cuts and the possible extension of insolvency protections. Those sectors hardest hit by lockdown (tourism, airlines, hospitality) will also see significantly more support.
  • British PM Boris Johnson has told the German government that the UK was prepared to accept a no deal scenario on trade with the EU at the end of the current post-Brexit transition period at the end of this year.

If you have any questions regarding this commentary and how it impacts your investment portfolio, please get in touch with your Quill Relationship Manager.

Happy New Financial Year from all here at Quill. Hopefully this next financial year shapes up to be a more positive and prosperous financial year than the last.

Quill Group Preface

We are all acutely aware that many businesses have had a very difficult year and in some cases will not recover. As a consequence there are lots of individuals that are either out of work or working reduced hours. This of course impacts on both their family as well as the broader community.

On a slightly more positive note we heard today that most States with the exception of Victoria will be opening up their borders in July and hopefully this will encourage more business, travel and tourism within Australia. Another positive is way in which many people have embraced the use of technology during this lock down. This has undoubtedly led to more efficient use of time within many businesses and certainly in our business most clients have welcomed the use of “zoom” or teleconferencing, particularly in cases where people were traveling extended distances to see us.

In recent months I have bought you a number of notes written by economist Shane Oliver who is head of strategy at AMP capital. Whilst we don’t have any investment in AMP capital at this time and each week receive dozens of research and strategy notes from other highly credentialed economists, I find that Shane Oliver manages to convey a message which in some cases are fairly complex, in a plain English and less complex manner which I certainly appreciate. So far the feedback I have received is very positive but please feel free to provide honest feedback on any of the material we send out. The ultimate aim is to inform and educate without trying to impress by focusing on overly complex topics.

The theme of this weeks note is “ What may happen to investment markets in the lead up to the US elections scheduled for November this year?”

This is certainly something that our investment committee has spent a great deal of time pondering in recent months. After a recent run up in markets following the significant fall in March, a fair degree of volatility has now returned, particularly to share markets. This is not unexpected as on the one hand we are facing rising unemployment, increasing debt levels and an ever increasing rise in the number of COVID-19 cases. Coupled with this we have the uncertainty of what will happen in the US election along with a US President likely to embark on further trade wars or other desperate measures to beef up his popularity in the lead up to the November poll. However, pushing back against this is a huge injection of capital by Central banks and the prospect that a vaccine for COVID could only be six to twelve months away.

The most interesting thing we have learnt from this note was the fact that shares have actually performed better under Democrat than Republican presidents. This is somewhat surprising given that Biden has stated he favours increased taxes, greater health spending and more regulation which is more than often associated with weaker economic growth.

  • Peter Kirk, Relationship Manager | Executive Director

The US presidential election – implications for investors

This article was originally published on the AMP Captial Website 30 June 2020 by Dr Shane Oliver Head of Investment Strategy and Economics and Chief Economist, AMP Capital.

You can view the original article here: The US presidential election – implications for investors

Key Points

  • The run up to the US election on 3rd November has the potential to see increased share market volatility if it looks increasingly likely Biden will win and if Trump ramps up tensions with China (and maybe Europe) in response. However, this is likely to be short lived as there is no reason to expect a weaker economy and hence share market under a Biden presidency.
  • Historically, shares have performed better under Democrat than Republican presidents.

Introduction

Investor focus on the US election waned earlier this year after socialist Bernie Sanders dropped out of the Democratic primary race in favour of moderate Joe Biden. At the same time coronavirus became the main focus for markets. However, markets may soon start to pay more attention as the election is rapidly approaching, while Joe Biden is a moderate, he is proposing higher taxes and more regulation and President Trump is not having a good run. Trump’s re-election chances have fallen with a majority of surveyed Americans disapproving of his handling of the pandemic and recent civil unrest at a time when the US has plunged into its deepest recession since the 1930s. The historical record indicates incumbent presidents tend to lose when there is a recession in the two years before the election and unemployment has gone up.

1 Re Election Of Us Presidents Post Recession

Normally at this point past presidents seeking re-election have started to see an upswing in approval, but this is not evident yet for Trump. Rather, consistent with the above, according to Real Clear Politics’ average of polls Trump’s approval rating has fallen to 41.2% over the last two months, his disapproval rating is edging above its 2019 high, opinion polls have Biden leading Trump by around 9 points and Biden is ahead in all 6 “battleground states”, the ‘Predict It’ betting market, which had Trump ahead of Biden up until late May, now has Biden with a 23 point lead and also now has Democrats winning the presidency, the House and the Senate. The Democrats already have control of the House and are likely to retain that, but they need three seats to then along with the Vice President, gain a majority of the Senate. A clean sweep for the Democrats would remove the Senate as a blockage to higher taxes.

2 Trump Job Approval

However, it would be wrong to write Trump off. Polls and betting markets were not so reliable in the 2016 election, there are still four months to go to the election & ongoing civil unrest could see him garner support as a “law and order president” as Nixon did in 1968. And Trump rates more highly on the economy than Biden and this may get a boost if the economy continues to reopen and recover. A rebound in the economy is Trump’s best hope which partly explains why he cheered on reopening from the end of April. However, the rebound in US coronavirus cases in many states in the last few weeks puts all this at risk.

Key Biden policy directions versus Trump

Taxation: Biden plans to raise the corporate tax rate to 28% (reversing half of Trump’s cut to 21%), return the top marginal tax rate to 39.6% (from 37%) and tax capital gains and dividends as ordinary income.

Infrastructure: Biden plans to spend $1.3trn over 10 years.

Climate policy: Biden aims for the US to reach net zero emissions by 2050 by raising the cost of fossil fuels & boosting the development of alternatives (possibly with a carbon tax).

Regulation: Biden is likely to end the era of deregulation.

Healthcare: Biden wants to strengthen Obamacare and limit drug prices.

Trade and foreign policy: Biden would likely de-escalate tensions with Europe and strengthen the alliance, work with international organisations like the World Trade Organisation, work to re-establish the nuclear deal with Iran and adopt a more diplomatic approach to dealing with trade & other issues with China (working with Europe and Asian allies in the process). By contrast a re-elected Trump is likely to double down on his trade war with China and possibly elsewhere including Europe.

Budget deficit: For the near term, the budget deficit is likely to remain high whoever wins, but historically they have fallen under Democrats after rising under Republicans. That said, if the economy proves slow to recover Joe Biden may be more likely to respond with large public sector spending programs aided by ongoing Fed quantitative easing in order to deal with ongoing high levels of spare capacity and unemployment.

Economic impact

On their own higher corporate and top marginal tax rates, increased regulation and an increased cost of carbon which will weigh on energy companies when they are already struggling are negative for the growth outlook. For example, the rise in the corporate tax rate would knock around 6% off earnings per share for S&P 500 companies. In particular, they may reverse some of the supply side boost provided by Trump. However, as with all things economic its never as simple as that.

  • First, the negative impact of tax hikes and increased regulation in the short term could be more than offset by increased infrastructure spending (particularly if some of the revenue comes from those with high saving rates).
  • Second once in office Biden may dampen down his planned tax hikes, particularly if the economy is still weak as is likely.
  • Third, raising taxes on top earners while a negative for incentive may help reduce inequality which has been a key driver of the populist backlash of recent years and has arguably been made worse by Trump.
  • Fourth, Biden’s trade and foreign policy focussed more on strengthening ties with Europe and a diplomatic approach to dealing with China may substantially reduce a source of angst and uncertainty under Trump (which is likely to intensify if he is re-elected).
  • Finally, more stable and predictable policy making reliant on expert advice under Biden may provide a more certain environment for business and so result in increased business investment despite a rise in the corporate tax rate. Don’t forget that the uncertainty caused by Trump’s trade wars offset the boost to investment from his tax cuts.

So, on balance I see no reason to expect a weaker economic and share market outlook under a Biden presidency.

Likely market reaction

Firstly, despite the heightened policy uncertainty the election year is normally an okay year for US shares.

3 Us Market Returns Through The Presidentail Cycle

Since 1927, the election year, or year 4 in the presidential cycle, has had an average total return of 11.2% pa, which is only just below the average return for all years. Of course, this year is complicated by the coronavirus hit to growth and so may well be weak regardless of the election.

Second, the run up to the election could see increased share market volatility if Trump’s prospects look bleak for two reasons: investors may start to fret about the prospects of increased taxes and regulation under a Biden presidency, particularly if it looks like Democrats will win control of the Senate; and Trump may reason that he will have nothing to lose by seriously ramping up tensions with China (and maybe Europe) in a way that threatens the economic outlook, but with the prospect of shoring up his base and rallying Americans around the flag. However, while there may be short term jitters ahead of the election, for the reasons noted in the last section, there is no reason to expect a weaker economy and hence share market under a Biden presidency. Investors may ultimately welcome more reasoned and predictable policy making.

Third, historically US shares have done best under Democrat presidents with an average return of 14.6% pa since 1927 compared to an average return under Republican presidents of 9.8% pa. This has been evident in recent years with good average annual returns under President’s Obama (14.8% pa) and Clinton (19.1% pa) versus terrible returns under President G W Bush (-0.6% pa) but strong returns under President Trump’s first three years (16.3% pa).

However, the best average result has actually occurred when there has been a Democrat president and Republican control of the House, the Senate or both. This has seen an average return of 16.4% pa. By contrast the return has only averaged 8.9% pa when the Republicans controlled the presidency and Congress.

4 Us Market Returns By Political Configuration

Concluding comment

The run up to the US election has the potential to drive increased share market volatility if it looks increasingly likely that Biden will win and raise taxes and regulation and the risk is probably greater if President Trump decides he has nothing to lose and so ramps up tensions with China and maybe Europe. This would weigh on global and Australian shares and the Australian dollar given Australia’s exposure to China. However, this is likely to be short lived as there is no reason to expect a weaker economy and hence share market under a Biden presidency and he is likely to take a less disruptive approach to trade and foreign policy issues.

The following is from Chris Lioutas from Insight Investment Consultants who sits on the Quill Group Investment Committee.  Although relatively technical in nature, we thought it was worthwhile sharing his commentary on where markets are at currently and what headwinds they are facing.

Introduction

It’s fair to say that we finally have alignment between markets and economics with both in a state of flux at present. That alignment could be short-lived (in either direction) or it could be the status quo for the remainder of the year given the uncertainties that lie ahead.

Key will be some milestones ahead, namely government fiscal (stimulus) cliffs, virus waves and the proximity of a vaccine, and the US presidential race. De-globalisation and US-China relations are a close 4th and 5th.

Market immunity

Since the March lows, investment markets, particularly equities, have taken most of the bad news, fears and concerns in their stride. You could say equity markets have built up a level of immunity (pardon the pun) since the GFC which has only continued and been somewhat exacerbated by the extraordinary central bank and government stimulus we’ve seen since lock-downs began.

This can be evidenced by the extremely sharp rally we saw in April, on almost little to no new positive news, and also again a few weeks back where equity markets fell sharply (circa 6%) for all of one day before investors were ready to buy back in yet again.

Central bank action

The reason for this is what central banks have done to cash rates and government bond yields, which in the developed world are all between 0-1%, and what central banks are currently doing in asset markets (i.e. buying large amounts of bonds, and equities in some instances, support asset prices).

“Don’t fight the Fed” is a catchphrase used regularly in investment markets and for now it could be extended to don’t fight the RBA, BOJ, ECB, BOE, and PBOC, and which ever other central bank that is easing.

But will central bank action be enough? It’s possible in the very short term, but in the medium to longer term governments will need to step up and take the lead from central banks as they are best placed to put stimulus into the hands of consumers and small business, which today power most economies.

Equity markets this month are showing a tendency to be range-bound – i.e. trade within a band – with prices falling on concerns regarding the milestones mentioned above, before prices then rising when equity markets get “too cheap” relative to the returns on cash and bonds.

The key consideration then is what those milestones look like now, and more importantly, what they’re likely to look like as we get closer to each one. Two of the milestones have a fixed date (i.e. fiscal cliffs and the US presidential race) whilst virus waves and a potential vaccine have a variable date. Over the last 5 years or so, markets have better navigated concerns / risks with a fixed date, whilst struggling and taking a little longer to overcome those with a variable date.

Upcoming fiscal cliffs

In a nutshell, the fiscal cliffs are the upcoming dates we have for the expiry of certain government measures put in place during the depths of March. For the US, many of these end in July and August, whilst for Australia they largely end in August and September.

In addition, locally, the bank freeze on mortgage repayments also ends in September. Absent an extension, or some other new stimulus to fill the void, unemployment will rise significantly and likely remain high for multiple years.

Locally, many businesses don’t have the cash flow and/or balance sheets to continue to meet some of the highest wages in the world (i.e. the minimum wage was increased again last week whilst we already had the highest minimum wage in the world) given the drop in demand for goods and services since the lock-downs began.

Other businesses will have taken the last 2-3 months to either make their business more efficient / productive and/or figure out which roles they really need in the weaker economic period ahead. That all doesn’t relate well to employment. It means higher unemployment, higher underemployment, less hours worked, and lower wages.

Right now, it’s fair to say markets are betting that governments either extend and/or provide fresh new stimulus over the coming months. But we really don’t know. We’re assuming they do, because they have to, given the economic consequences, but we can make a fairly rational argument for not doing so as well.

Impact of second waves and outbreaks

Virus waves and a vaccine are really a function of the pace of reopening (i.e. easing restrictions) and the government response / narrative to each. As much as we’d like, lock-down won’t make the virus disappear. Even a vaccine won’t make the virus disappear. Governments need to be very careful about their response to waves of the virus.

The first lock-downs in March were to allow governments and health authorities to get prepared and to not overburden the health system. Considering preparations have all been made and considering many of the hospitals locally and globally are now relatively empty, re-initiating restrictions and/or going into lock-down again makes absolutely no sense whatsoever. All it would do is make the economic contraction deeper and more prolonged, crippling more businesses, instilling more fear, and decimating consumer and business confidence and sentiment.

We are currently seeing a 2nd wave of sorts in the US, China, and closer to home in Victoria. It’s important to note that these waves are an increase in virus cases, not an increase in virus deaths, with daily deaths continuing to reduce all around the world. These waves are to be expected as greater easing of restrictions are lifted and as more testing takes place. These waves shouldn’t be ignored, but nor should they be a source of panic or fear, and any form of government overreaction will simply set us back on both the health (i.e. herd immunity) and economic fronts.

Until there is a readily available vaccine that is effective in the majority of the population, the virus will be prevalent. Recent studies have confirmed a few effective treatments for the virus for those more adversely affected by it (i.e. those with significant pre-existing conditions, usually 2 or more). These treatments will help save lives, may shorten how long a person is contagious, and will remove some fears and concerns for the public.

US elections

The US elections take place in November and right now it’s a fairly open race. As it stands, we have a Democrat led lower house, a Republican led upper house, and a Republican President in Donald Trump. Recent polling has been less favourable to Trump and the Republicans, which is in stark contrast to pre-virus polling which had Trump winning the election fairly easily. Polls haven’t been as effective over the last few years largely because the polling has been conducted poorly and/or with bias and voters have changed their voting intentions right up until the day of the vote.

Currently we’re seeing political warfare play out in almost civil war-like conditions with the Left (Democrats) taking full advantage of the situation started by lock-down and exacerbated by a death caused by police at the time of arrest. This has coincided in a surge in support for the Democrats, but has it gone too far? There has been little to no Republican response date, almost like the strategy is to let the Left take it too far, expose themselves, and then implode, which would push swing voters and states firmly in favour of Trump (similar to the last election).

But it’s a dangerous ploy this time around as the Republicans risk alienating their own voter base through lack of action, which together with the help of news and social media could result in a clean sweep for the Democrats (i.e. the House, the Senate, and the Presidency), which would set the Republican party back years.

Why is this important? Democrat policies are generally negative for share markets, generally involve higher taxes (hampering the economic recovery), and generally involve significant expenditure (which would put the US budget, and hence the US government bond market, at serious risk) but would actually aid in the economic recovery assuming the expenditure was appropriate and productive. The US remains the lead economy and the lead share market globally, hence the importance of a recovering US economy and a healthy US equity market.

The US political outcome also lends itself to the 4thand 5th milestones mentioned above, namely de-globalisation and US-China relations. Both are significant risk events and well worth watching and monitoring but won’t be of impact until after the US elections.

Summary

For now, equity markets continue to be forward looking, focusing on next year’s likely earnings, whilst bond markets are still operating with some trepidation given risks have not yet passed and plenty of unknowns remain. Property and Infrastructure fortunes are closely linked to the easing of restrictions, whilst the oil price has risen on faster than expected reopening and strong levels of compliance in relation to production cuts from oil producing countries. The Aussie dollar has also risen, breaking through the US70c mark, before weakening a little more recently.

We continue to believe that diversification and selectivity remain key. In general, we wouldn’t advocate adding a whole lot of risk into portfolios right now, but we also wouldn’t advocate taking a whole lot of risk out of portfolios right now. We remain very watchful of the milestones mentioned above as these will dictate investor behaviour in the short term, whilst looking for opportunities with the medium to longer term in mind.

If you have any questions regarding this commentary and how it impacts your investment portfolio, please get in touch with your Quill Relationship Manager.

Unfortunately permanent residents are not eligible to apply for the HomeBuilder Grant for new house builds or renovations. As per the eligibility requirements released by Treasury, only Australian Citizens are eligible to apply for the $25,000 HomeBuilder Grant.

The eligibility for the HomeBuilder grant will be the same as the First Home Loan Deposit Scheme and only open to Australian citizens.

Can a joint application for the HomeBuilder grant be made where one applicant is an Australian citizen and the other a permanent resident or holder of a different visa type?

No. Both applications must be Australian citizens.  This is outlined in the Treasury fact sheet:

“Carla and Andrew apply for HomeBuilder via the relevant revenue office which conducts the eligibility checks and confirms that both Carla and Andrew are Australian citizens.”

Are New Zealand citizens eligible for the HomeBuilder Grant?

Sorry bro, no ANZAC spirit here.  The eligibility criteria is strict – it’s not open to New Zealand citizens or any other permanent residents.

What if only the Australian citizen (who is one of the persons listed on the title) applies by themselves and excludes their non-citizen partner?

This is not possible.  The updated HomeBuilder Grant FAQs issued 14 July 2020 states:

“If more than one person is listed on the certificate of title they must jointly apply for the HomeBuilder grant as a couple (provided they meet the definition of a ‘couple’ in their State or Territory – please see FAQ below). A property is only eligible for one HomeBuilder grant.“

Can the non-Australian citizen transfer their portion of the property title to their spouse and then the Australian citizen spouse submits an application?

This may be possible, although this will require a lender that will enable the mortgage to be joint but the security to be with only a single member of the couple, meaning a re-finance may also be required.

In addition if transferring a % of the title, stamp duty will likely apply in most States, however depending on the value of the property or land, and whether any concessions are available, the amount of stamp/transfer duty may be significantly less compared to the $25,000 grant.

What documentation is required to be provided?

The State or Territory revenue office will require certain documents to process your application. It is expected that you will need to provide the following at a minimum:

  • proof of identity;
  • a copy of the contract, dated and signed by you and the nominated registered or licenced builder;
  • a copy of the builder’s registration or licence (depending on the state you live in);
  • a copy of your 2018-19 or 2019-20 tax return or ATO issued Notice of Assessment to demonstrate your eligibility against the income cap; and
  • documents such as council approvals, building contracts or occupation certificates and evidence of land value.

Please also read the Home builder grant eligibility criteria here: HomeBuilder $25,000 Grant Eligibility

What is a citizenship application has been lodged by a permanent resident?

At this stage it would need to be approved well before 31 December 2020 to enable an application to be made before the cut off date.

There is nothing preventing construction or renovation works continuing (assuming already planned) and if the citizenship is the only item preventing the Grant being accepted, if it ends up being approved it should be considered a bonus but shouldn’t be a deciding factor.

Is it fair to exclude permanent residents who are not citizens from the HomeBuilder Grant?

Fairness is a matter of opinion, and considering that most other Government incentives relating to COVID-19 are open to permanent residents, it doesn’t seem fair that non-citizens are excluded.

Permanent residents make up a significant portion of our community, pay taxes, start businesses, create jobs and in many cases more likely to build a new home.  The exclusion of permanent residents from the HomeBuilder Grant seems to reduce the effectiveness of the building and construction industry stimulation the Government is trying to achieve.

Also read: ‘It’s unfair’: HomeBuilder scheme makes Australian permanent residents feel left out

 

Article Contents

The HomeBuilder $25,000 grant eligibility requires those building a new home or undertaking significant renovations to spend at least $150,000 (but not more than $750,000) on the project.  In addition the pre-renovation value of the property must be $1.5m or less, which rules out adding that extra wing to your Vaucluse mansion.

Further information on the HomeBuilder $25,000 grants and details around eligibility will be updated as the Government released more detail.

Updated Frequently Asked Questions: 14 July 2020

Scott Morrison’s Announcement on the HomeBuilder $25,000 Grant

Prime Minister Scott Morrison said HomeBuilder would save jobs at a time when the industry was facing extreme uncertainty.

“This is about targeted taxpayer support for a limited time using existing systems to ensure the money gets used how it should by families looking for that bit of extra help to make significant investments themselves,” he said.

“If you’ve been putting off that renovation or new build, the extra $25,000 we’re putting on the table, along with record-low interest rates, means now’s the time to get started.”

Renovation work will not include structures separate to the main property, such as swimming pools, tennis courts and sheds.

The Treasury website has further information here: https://treasury.gov.au/coronavirus/homebuilder

HomeBuilder $25,000 Grant Eligibility Means Testing

In addition the HomeBuilder $25,000 grant eligibility is means tested.  Only singles who earned no more than $125,000 the previous financial year and couples who earned up to $200,000 will be eligible for the grants. More details will be released soon on whether these thresholds are taxable income or adjusted taxable income.

Homebuilder 25000 Grant Eligibility

Image courtesy of news.com.au

Can Investors Access HomeBuilder $25,000 Grant?

No. The HomeBuilder $25,000 grant eligibility requires the grant to be spent on a principal place of residence so therefore cannot be spent on investment properties.  In addition, companies or trusts who own residential property will not be eligible.

Eligible Project Types and Time-frames

Sheds, yurts, granny flats, pools, tennis courts and any other structure not attached to the home will not be eligible. The $25,000 HomeBuilder grant will be available from June 4 until December 31.

Unfortunately DIY renovators are not eligible for the $25,000 HomeBuilder grant.  Only projects undertaken by licensed builders will be eligible for the $25,000 grant.

There had been concern from some in the industry that the Government money would incentivise “cowboys” to rush into the market with little regard for health and safety, which the scheme takes steps to address.

They include requiring that all eligible builders be licensed or registered before the Government’s announcement, keeping the timeframe for the scheme to six months, and having tighter eligibility for the program.

HomeBuilder Frequently Asked Questions (FAQs)

What is HomeBuilder?

HomeBuilder is a time-limited, tax-free grant program to help the residential construction market to get through the Coronavirus pandemic. HomeBuilder will provide eligible owner-occupiers (including first home buyers) with a grant of $25,000 to build a new home or substantially renovate an existing home.

When can I access HomeBuilder?

HomeBuilder will be available for building contracts signed between 4 June 2020 and 31 December 2020.

How can I access HomeBuilder? How do I apply?

You will be able to apply for HomeBuilder through your relevant State or Territory revenue office or equivalent authority, once the State or Territory Government that you live in (or plan to live in) signs the National Partnership Agreement.

States and Territories will backdate acceptance of HomeBuilder applications to 4 June 2020 once the National Partnership Agreement is signed.

You should contact your relevant State or Territory revenue office for more information about when and how you will be able to apply for HomeBuilder.

When will I receive HomeBuilder?

HomeBuilder grants will be paid by the relevant State or Territory authority provided the applicant meets the eligibility criteria. The exact timing and who the grant is paid to us unknown, however we expect the grant will be paid directly to the builder / developer.

When will the HomeBuilder Grant be paid?

HomeBuilder is being implemented in partnership with States and Territories. For new builds, grants will be paid in line with the timing of payments for first home owner grants or at the discretion of your State and Territory if there is no first home owner grant schemes in place. For substantial renovations, grants will be paid once at least $150,000 of the contract price has been paid in respect of the renovation.

Who pays HomeBuilder and who receives it?

It is expected that the relevant State or Territory revenue office will distribute the $25,000 grant directly to the applicant.

Am I eligible to receive HomeBuilder?

To access HomeBuilder, owner-occupiers must meet the following eligibility criteria:

  • you are a natural person (not a company or trust)
  • you are aged 18 years or older;
  • you are an Australian citizen (at this stage permanent residents are NOT eligible);
  • you meet one of the following two income caps:
    • $125,000 per annum for an individual applicant based on your 2018-19 tax return or later; or
    • $200,000 per annum for a couple based on both 2018-19 tax returns or later;
  • you enter into a building contract between 4 June 2020 and 31 December 2020 to either:
    • build a new home as a principal place of residence, where the property value (house and land) does not exceed $750,000; or
    • substantially renovate your existing home as a principal place of residence, where the renovation contract is between $150,000 and $750,000, and where the value of your existing property (house and land) does not exceed $1.5 million;

Owner-builders and those seeking to build a new home which will be used as an investment property, or renovate an existing home which is an investment property, will not be eligible for HomeBuilder.

The registered or licensed builder (depending on the state or territory) must demonstrate that the contract price for the new build or substantial renovation is no more than a comparable product (measured by quality, location and size) as at 1 July 2019, if requested by the purchaser.

Are the HomeBuilder income caps based on gross taxable income or adjusted taxable income?

It is not definitive whether income caps are measured against an person or couples their gross taxable income or adjusted taxable income. More will be known when the various States release their application processes.

At this it’s most likely that the income caps for the Homebuilder grant will be based on gross taxable income (excluding superannuation) which is the same criteria as the First Home Loan Deposit Scheme (FHLDS). 

Your gross taxable income can be found on your ATO issued Notice of Assessment.

How do I prove my taxable income?

Taxable income is shown on your notice of assessment. The notice of assessment is issued by the Australian Taxation Office once your tax return for an income year is processed and this can be used to demonstrate your taxable income.

Note: Taxable income is your gross income less allowable deductions and represents the amount of income you pay tax on. More information on taxable income can be found at:https://www.ato.gov.au/Individuals/Lodging-your-tax-return/In-detail/What-is-income-/#Taxableincome

What if I don’t lodge a tax return?

If you didn’t earn any income or you earned below the tax free threshold you may be able to lodge a ‘nil tax return’ or a ‘non lodgement advice’ to the Australian Taxation Office. Evidence of a nil tax return or non- lodgement advice is appropriate evidence of your income in the relevant financial year. Additional information on requirements for lodging a tax return is available on the Australian Taxation Office website.

Will the tax return have to match the name on the building contract and land title?

Yes, the applicant must be the person(s) who is/are listed on the certificate of title of the property, and the notice of assessment.

What is the definition of ‘couple’?

This will be determined by the relevant State or Territory authority. Generally this would include couples in a registered domestic relationship, or those living as a couple on a genuine domestic basis.

What proof do I need to provide to show that I reside or intend to reside at the property?

This will be determined by the relevant State or Territory authority. Implementation of the HomeBuilder program is currently being considered by States and Territories. It is expected that, where possible, States and Territories will align the HomeBuilder application processes with existing processes for First home owner grants (or similar).

My partner and I jointly own our home. I am an Australian citizen but my partner is not. Can I apply even though the home is jointly owned?

The Scheme is only open to Australian citizens. Eligible owner-occupier(s) must be listed on the property’s certificate of title, and they must meet the eligibility criteria of the program. Permanent residents are not eligible for the Scheme.

Also read: Are permanent residents eligible to apply for the $25,000 building and renovation grant?

Am I able to apply for a second HomeBuilder grant for my property as I wish to undertake two substantial renovations on my property?

No. A property is only eligible for one HomeBuilder grant. The eligible applicant can only receive the HomeBuilder grant once.

I already own land but haven’t signed a contract to build a new house – am I still eligible?

Yes, if you meet the following criteria:

  • If you own a property (house and land), and knock the house down to rebuild – this will be counted as a substantial renovation, and therefore subject to the renovation price range of $150,000 to $750,000 provided the total value (house and land) of the property does not exceed $1.5 million pre- renovation;
  • If you own vacant land before 4 June 2020, and then build, the total value of the land and new build cannot exceed $750,000; or
  • If you buy the land after announcement, and then build, the total value of the land and build cannot exceed $750,000.

What is the definition of an owner-builder?

A licensed or registered builder cannot undertake building or substantial renovation work on their own property. An owner-builder is intended to mean a person who is the registered or licensed builder and who takes legal responsibility for domestic building work carried out on their own land/property. Further detail will be made available through the relevant State or Territory administrative authority.

What if I renovate my house and then want to sell? Is there a limit on how long I need to live there?

It is expected that you will continue to live at the property (as your principal place of residence) for at least 6 months. However, this will be confirmed by the relevant state or territory authority, noting that implementation of the HomeBuilder program is currently being considered by States and Territories.

A family member or relative is a Builder. Can they help me build my new house under HomeBuilder?

Details regarding implementation of the HomeBuilder program are currently being considered by States and Territories to ensure it can be implemented effectively. It is expected that, in negotiating the contract, the parties must deal with each other at arm’s length. This means the contract must be made by two parties acting freely and independently of each other, and without offering favour for some special relationship, such as being a relative. The terms of the contract should be commercially reasonable and the contract price should not be inflated compared to the fair market price.

Is there a limit to how many people can get HomeBuilder?

No. HomeBuilder is an uncapped, time-limited grant.

Are permanent residents eligible for the $25,000 HomeBuilder Grant?

No. As per the eligibility requirements released by Treasury, only Australian Citizens are eligible to apply for the $25,000 HomeBuilder Grant.

At this stage it appears likely that the eligibility for the Homebuilder grant will be the same as the First Home Loan Deposit Scheme and only open to Australian citizens.

Also read: Are permanent residents eligible to apply for the $25,000 building and renovation grant?

Can a joint application for the HomeBuilder grant be made where one applicant is an Australian citizen and the other a permanent resident or holder of a different visa type?

No. Both applications must be Australian citizens.  This is outlined in the Treasury fact sheet:

“Carla and Andrew apply for HomeBuilder via the relevant revenue office which conducts the eligibility checks and confirms that both Carla and Andrew are Australian citizens.”

Assuming the eligibility criteria for the $25,000 HomeBuilder grant is the same as the First Home Loan Deposit Scheme then BOTH members of a couple would need to be Australian citizens.

Are New Zealand citizens eligible for the $25,000 HomeBuilder grant?

No, sorry bro, as per the above, to be eligible for the HomeBuilder the applicant(s) must be Australian citizens.

I already own land but haven’t signed a contract to build a new house – am I still eligible?

Yes, if you meet the following criteria:

  • If you own a property (house and land), and knock the house down to rebuild – this will be counted as a substantial renovation, and therefore subject to the renovation price range of $150,000 to $750,000 provided the total value (house and land) of the property does not exceed $1.5 million pre-renovation;
  • If you own vacant land before 4 June 2020, and then build, the total value of the land and new build cannot exceed $750,000; or
  • If you buy the land after announcement, and then build, the total value of the land and build cannot exceed $750,000.

I’ve already entered into a contract to renovate or build, or constructions is already underway – am I eligible?

No. As per the eligibility requirements, the HomeBuilder grant can only be applied for new contacts entered into between 4 June and 31 December 2020.

I’ve signed a contract to build or renovate before 4 June 2020, what are my options?

The HomeBuilder grant can only be applied for new contacts entered into between 4 June and 31 December 2020.

If construction has not commenced but you’ve signed a contract prior to 4 June 2020, speak to your builder about your options.

What type of dwellings are eligible under HomeBuilder?

All dwelling types (house, apartment, house and land package, off-the-plan, etc) are eligible under HomeBuilder, in accordance with the requirement that the owner-occupier must contract to build a new dwelling or substantially renovate their existing dwelling. The applicant must also meet the eligibility requirements outlined above.

Are off the plan apartments eligible for the Homebuilder grant?

Yes. As per the FAQs included in the treasury documents, a contact for the off the plan apartment will be eligible provided the other eligibility criteria is met:

  • you enter into a building contract between 4 June 2020 and 31 December 2020 to build a new home (including an off the plan apartment) as a principal place of residence, where the property value (house and land) does not exceed $750,000;

It is unknown whether HomeBuilder will be available for an off the plan apartment where construction has already commenced as the grant is to incentivise and stimulate new construction in the short term.

What are the price caps associated with HomeBuilder?

HomeBuilder is subject to two prices: a contract price cap (for new builds and renovations) and an income cap for applicants.

Contract price cap

A national price cap of $750,000 will apply for new home builds. This means that the value of new builds (house and land), house and land packages, and off-the-plan purchases must not exceed $750,000 to be eligible for HomeBuilder.

For renovations, a building contract price range of between $150,000 and $750,000 will apply and the total value of your property before renovation must not exceed $1.5 million.

The $150,000 minimum building contract cannot include the cost of the land. The HomeBuilder grant is specifically targeted to stimulate building activity.

Income price cap

Eligible applicants must meet one of the following two income caps:

  • $125,000 per annum for an individual applicant based on the 2018-19 tax return or later; or
  • $200,000 per annum for a couple based on their combined 2018-19 tax return or later.

The income price cap, as well as the eligibility criteria for the applicant, were chosen to reduce complexity as they align with the Commonwealth Government’s First Home Loan Deposit Scheme.

Is the HomeBuilder grant taxed?

No – a HomeBuilder grant will not be taxed. This is consistent with existing state and territory First Home Owner Grant programs.

What if I want to buy a recently built home that has never been lived in before? (eg spec build)

No. HomeBuilder is intended to support activity and provide a pipeline of work for the residential construction sector in the second half of 2020. An existing home that has already been completed, or started construction before 4 June, does not qualify for HomeBuilder.

Further, where construction commences on or after 4 June 2020, provided the contract is signed between 4 June and 31 December 2020, then the property purchase may be eligible for HomeBuilder.

What if I want to buy an off-the-plan apartment or townhouse?

Off-the-plan apartments or town houses are eligible for HomeBuilder.

If you sign the contract to buy the off-the-plan dwelling on or after 4 June 2020 and on or before 31 December 2020 and construction commences on or after 4 June 2020 then the property purchase may be eligible for HomeBuilder.

However, if you sign the contract to buy the dwelling after 4 June 2020, and construction on the home commenced before 4 June 2020, then the home does not qualify for HomeBuilder.

I want to build a new home in a land lease community or retirement village. Is my property eligible for HomeBuilder?

Eligible owner-occupier(s) must be listed on the property’s certificate of title. The owner-occupier must also be a natural person (not a company or trust), and meet the other eligibility criteria of the program.

What about pre-fabricated houses? Are they considered construction and eligible for HomeBuilder?

Construction must be undertaken by a registered or licensed building service ‘contractor’ who is named as a builder on the building licence or permit. Provided the construction is undertaken by a licensed builder and meets all other eligibility requirements, it will be eligible for HomeBuilder.

What happens if approvals to build my dwelling are delayed?

Initially the construction pursuant to the contract must have commenced within three months of the contract date, however this requirement has been removed from the scheme.

Can the HomeBuilder grant be used to build or renovate an investment property?

No. To be eligible for the $25,000 HomeBuilder grant the building contract must be for a property that is or will be a the principal residence of the applicant(s).

There is nothing preventing or restricting the home becoming an investment in the future, however applicants need to be mindful of schemes to artificially class an investment property as a principal residence.

Are properties owned by self-managed super funds (SMSFs) or trusts eligible for the HomeBuilder grant?

No. To be eligible for the $25,000 HomeBuilder grant the building contract must be for a property that is or will be a the principal residence of the applicant(s).

Investment properties held by trusts including self-managed superannuation funds will not be eligible.

What renovations will be eligible

To be eligible for HomeBuilder, the value of renovations must be within the price range of $150,000 and $750,000, the total value of your existing house and land must not exceed $1.5 million.

Renovations must improve the accessibility, live-ability and safety of the property. This excludes building a tennis court, pool or shed for the renovation contract for eligibility purposes.

Renovations must be completed by a licenced or registered builder (depending on the state or territory). In addition, any building or renovation contract entered into must be at arm’s length. This means the contract must be made by two parties freely and independently of each other. The terms of the contract should be commercially reasonable and the contract price should not be inflated compared to the fair market place.

Are knock-down rebuilds considered “renovations”?

Yes. Knock-down rebuilds are considered substantial renovations for the purposes of HomeBuilder.

Is landscaping considered a substantial renovation?

Substantial renovations are not expected to include renovations that are primarily cosmetic in purpose, such as landscaping. A renovation must substantially alter the existing dwelling.

Are granny flats eligible for HomeBuilder?

No, standalone granny flats are not eligible for the HomeBuilder grant. A granny flat built as an extension to an existing house may be eligible.

The renovation works must be to improve the accessibility or safety or liveability of the dwelling. It cannot be for standalone granny flats, swimming pools, tennis courts, and structures that are not connected to the property (i.e. outdoor spas and saunas, sheds or standalone garages).

Is the building of a granny flat eligible for the HomeBuilder grant?

Renovations must be “attached to the home” to the eligible.  This means construction of a separate granny flat would not be eligible however an attached extension physically connected to an existing home may be eligible under the HomeBuilder scheme.

I am not a first home buyer – can I access HomeBuilder?

Yes. Provided you meet the eligibility criteria, you can apply for a HomeBuilder grant. However, HomeBuilder is not available for investment properties or to owner-builders.

Is the $25,000 HomeBuilder Grant only for first home buyers?

No. Provided you meet the eligibility criteria, you can apply for a HomeBuilder grant. You do not need to be a first home buyer. However, if you are a first home buyer additional State based incentives such as reduced or nil stamp duty may apply if you are builder a new home (house and land packages etc).

Can the $25,000 HomeBuilder amount be used as part of a deposit to build a new home?

No, however it will likely reduce the amount you need to borrow if you are looking at purchasing a new house and land contract. The $25,000 HomeBuilder grant if approved will not be paid to you personally, therefore it cannot be used to fund part of your home deposit.

Also, if you are a first home buyer there are likely other first home owner grants, nil or discounted stamp duty as well as the First Home Loan Deposit Scheme (FHLDS) you can access.

How do I apply for HomeBuilder?

As at 19 June 2020, applications are not currently open for any State or Territory.

Information on how to apply will be made available when the National Partnership Agreement is finalised. It is expected that, where possible, States and Territories will align the HomeBuilder application processes with existing processes for first home owner grants (or similar). Applicants will be able to apply in relation to eligible contracts that are entered into from 4 June 2020 up to 31 December 2020.

States and Territories will backdate acceptance of HomeBuilder applications to 4 June 2020 once the National Partnership Agreement is signed.

Home Builder Grant Application by State

The below table provides links to the relevant application forms (both online applications and PDFs) by State and Territory.

State or TerritoryStatusApplication Form
NSWOPEN

HomeBuilder Grant NSW Application Form

Application Guidelines NSW (PDF)

VICOPEN

HomeBuilder Grant VIC Application Form

Application Guidelines VIC (PDF)

QLDOPEN

HomeBuilder Grant QLD Application Form

Application Information

SAOPEN

HomeBuilder Grant SA Application Form

Application Information

TASOPEN

HomeBuilder Grant TAS Application Form

Application Information (PDF)

WAOPEN

HomeBuilder Grant WA Application Form

Application Information

ACTOPEN

HomeBuilder Grant ACT Application Form

Application Information

NTOPEN

HomeBuilder Grant NT Application Form

Application Information

You should contact your relevant State or Territory revenue office for more information about when and how you will be able to apply for HomeBuilder.  We will update the following links and provide information on State based applications as they become available.

Apply for HomeBuilder Grant NSW

Update 11/08/2020

Revenue NSW is now accepting applications for the Commonwealth HomeBuilder Grant.

For further information on eligibility and the application process, please refer to the HomeBuilder guidelines and application form available on the Revenue NSW website.

You can also contact Revenue NSW at Home.Builder@revenue.nsw.gov.au or call 1300 130 624.

Apply for HomeBuilder Grant VIC

Update 10/08/2020

State Revenue Office Victoria is now accepting applications for the Commonwealth HomeBuilder Grant. For further information on eligibility and the application process, please refer to the HomeBuilder guidelines and application form available on the State Revenue Office Victoria website.

To provide certainty and confidence to Victorian HomeBuilder participants, the construction commencement timeframe will be extended to six months given the unique COVID-19 restrictions throughout the state. For further information see the HomeBuilder Grant Guidelines.

Apply for HomeBuilder Grant QLD

Update 04/08/2020

The Queensland Office of State Revenue (OSR) is now accepting applications for the Commonwealth HomeBuilder grant. For further information on eligibility and the application process, please refer to the OSR website.

You can also contact the OSR at HomeBuilderGrant@treasury.qld.gov.au or call 1300 300 734.

It is expected that an online application will be available from 10 August 2020. Further information from the Queensland Government in regards to the HomeBuilder Grant:

You can download the PDF application form here: HomeBuilder Grant QLD Application Form

QLD – The Office of State Revenue

Apply for HomeBuilder Grant SA South Australia

Update 17/07/2020

South Australian residents can now apply for the HomeBuilder Grant via RevenueSA.

HomeBuilder Grant – South Australia

HomeBuilder Grant – South Australia Application Form (PDF)

Apply for HomeBuilder Grant Tasmania

Update 06/07/2020

Applications for both the State and Federal HomeBuilder grants are now open. The Tasmanian Government’s $20,000 grant and the Morrison Government’s $25,000 grant means Tasmanians can potentially access up to $45,000 for their new home build.

A. Tasmanian HomeBuilder Grant (State Government) Updated 6 July 2020
Tasmanian HomeBuilder Grant is a grant of $20 000 ​avai​lable to ​owner-​occupiers for eligible new home builds where the contract is signed between 4 June 2020 and 31 December 2020 inclusive. ​​

For the eligibility criteria, building and contract requirements and the application process for both the Tasmanian and Commonwealth ​Grants, refer to the HomeB​uilder Grant Guideline.​

B. Commonwealth HomeBuilder Grant (Commonwealth Government) Updated 6 July 2020
Commonwealth HomeBuilder Grant is a grant of $25 000 for eligible owner-occupiers (including first home buyers) building a new home, or substantially reno​vating an existing home, where the contract is signed between 4 June 2020 and 31 Dec 2020 inclusive.

For the eligibility criteria, building and contract requirements and the application process for both the Commonwealth and Tasmanian Grants, refer to the HomeB​uilder Grant Guideline.​

Application form – Commonwealth $25,000 HomeBuilder Grant (Tasmanian Residents)

Apply for HomeBuilder Grant NT

Update 04/08/2020

The Northern Territory Revenue Office is now accepting applications for the Commonwealth HomeBuilder grant.

For further information on eligibility and the application process, please refer to the HomeBuilder Grant Application Form and Lodgement Guide.

HomeBuilder Grant Application Form and Lodgement Guide PDF (393.5 KB)

Apply for HomeBuilder Grant WA

Update 29/07/2020

Revenue WA is now accepting applications for the Commonwealth HomeBuilder grant.

For further information on eligibility and the application process please refer to the application form.

Apply for HomeBuilder Grant ACT

Update 29/07/2020

Information on the application processes for those wishing to access the Commonwealth HomeBuilder grant is available through the Australian Capital Territory’s Revenue Office, the ACT Revenue Office. The ACT has a two-part application process.

Applicants can now complete Part A by registering their interest for HomeBuilder. Applicants must lodge the Part A form by 31 December 2020 for their application to be considered. If you register your interest you will be advised of updates to application forms and supporting materials. Completing the registration form does not in any way constitute eligibility for the grant.

A comprehensive application form will soon be available for applicants to complete Part B of their application. This form requires detailed information about the applicant, their builder, type of construction, as well as detailed supporting documentation.

What documentation will I need to provide?

The State or Territory revenue office will require certain documents to process your application. It is expected that you will need to provide the following at a minimum:

  • proof of identity;
  • a copy of the contract, dated and signed by you and the nominated registered or licenced builder;
  • a copy of the builder’s registration or licence (depending on the state you live in);
  • a copy of your 2018-19 or 2019-20 tax return or ATO issued Notice of Assessment to demonstrate your eligibility against the income cap; and
  • documents such as council approvals, building contracts or occupation certificates and evidence of land value.

More information on the documentation you will need to provide will become available through the relevant State or Territory authority.

When will I know if my HomeBuilder application is successful?

The relevant state or territory administering agent will notify you of the outcome.

What happens if my HomeBuilder application is not successful?

If you are dissatisfied with the outcome of your HomeBuilder application, you can request that the matter is referred to the relevant state or territory dispute resolution body. More information on the appeals process will become available in due course.

What happens if there is a change in circumstance and I’m no longer eligible?

If your circumstances change after you have applied for HomeBuilder but have not yet received the payment, and no longer meet the eligibility criteria, you will need to notify your State or Territory revenue office immediately.

Who pays HomeBuilder and who receives it?

The relevant State or Territory revenue office will distribute the $25,000 grant directly to the applicant.

Other Related Articles

The $25,000 HomeBuilder grant is one of a number of COVID-19 Government stimulus measures to boost the Australian economy.

To view more related articles on COVID-19 from Quill, please browse our blog.

Article Contents

Round 2 of the Government Small Business Grants QLD for the COVID-19 Adaption Program opens for new applications from 1 July 2020. $100 million in new funding is being made available to eligible small business who’ve been closed or impacted by coronavirus to adapt and sustain their operations.

Update: 3 July 2020 – 100% of funds available for South East Queensland small businesses applied for – CLOSED FOR SOUTH EAST QLD

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The funding round for Regional Queensland remains open. Please continue to submit your application. 

Summary of the COVID-19 adaption small business grant QLD

Grant open date1 July 2020
Amount of grant$2,000 to $10,000 per small business
Total amount of grant$100m ($50m only for South East QLD)
Purpose of grantSmall business adaption for COVID-19 impacts
Eligibility criteriaQLD small businesses.

How much is the QLD small business grant?

The amount available for the small business grants for QLD is a minimum of $2,000 and a maximum of $10,000 per eligible small or micro business.

Round one of the small business grant from the Queensland Government was fully allocated in less than a week, however this $10,000 grant has a larger funding pool of $100 million.

What must the grant be used for?

In recognition of the significant impacts of COVID-19 on small businesses in Queensland, money from the adaption program grant can be used towards the following:

  • financial, legal or other professional advice to support business sustainability and diversification
  • continuing to meet business operational costs including utilities, council rates, rent, telecommunication charges, insurance fees, licensing or franchise fees
  • strategic planning, financial counselling or business coaching aligned to business development and diversification
  • building the business through marketing and communications activities (e.g. content development – web pages, mobile apps, visual and audio media etc.)
  • digital/technological strategy development
  • digital training or re-training and up-skilling employees to adapt to new business models
  • capital costs associated with meeting COVID-19 safety requirements
  • specialised digital equipment or business specific software to move business operations online (e.g. logistics program for online ordering).

Note: Grant funds can be used towards any of the above activities occurring from 23 March 2020 onwards, keeping in mind the project must be completed within a maximum of 6 months from the date of approval.

This means the small business grants under this program can be used on expenses already paid where it’s related to supporting the business through COVID.

All invoices or quotes from suppliers will be checked to determine if they are genuine (e.g. supplier has as active ABN and the invoices or quotes have not been altered in any way).

What items are not covered by the COVID-19 small business adaption grant?

These activities will not be funded under this program:

  • applications with a total cost less than $2,000 – all your proposed activities or quotes and invoices must be eligible and be a total of $2,000 or more (but under $10,000)
  • business costs otherwise supported by other Queensland and Commonwealth Government financial assistance measures
  • salaries or wage expenses for your employees, including superannuation or WorkCover
  • services delivered in-kind (grant funding will only cover services paid for via a financial transaction)
  • purchase of business assets, such as stock or fleet vehicles/machinery
  • fees for services and/or goods provided by related parties (such as companies with common shareholdings or directorship with the applicant, and employees or immediate family of the applicant)
  • direct-selling businesses (where sales of another business’ goods or services are made in the customer’s home, work or other meeting place through methods such as party plan and network marketing)
  • goods or services purchased, or any payments made, prior to 23 March 2020.

Eligibility criteria for the QLD small business COVID-19 adaption grant

The eligibility criteria for this grant is the same as Round 1 which was launched in May 2020:

  • have been subject to closure or otherwise highly impacted by current shutdown restrictions announced by Queensland’s Chief Health Officer on 23 March 2020
  • demonstrate that business revenue has been significantly impacted since 23 March 2020 over a minimum 1-month period due to the onset and management of COVID-19
  • employ staff and have fewer than 20 employees at the time of applying for the grant
  • have a valid Australian Business Number (ABN) active as at 23 March 2020
  • be registered for GST
  • have a Queensland headquarters
  • have an annual turnover over $75,000 for the last financial year
  • have a payroll of less than $1.3 million
  • not be insolvent or have owners/directors that are an undischarged bankrupt.

South East QLD small business grant eligibility

When applying for round 2 of the small business grants QLD, you are a South East Queensland (SEQ) business if your principal place of business is located in 1 of the following local government areas:

  • Brisbane City Council
  • City of Gold Coast
  • Ipswich City Council
  • Lockyer Valley Regional Council
  • Logan City Council
  • Moreton Bay Regional Council
  • Noosa Shire Council
  • Redlands City Council
  • Scenic Rim Regional Council
  • Somerset Regional Council
  • Sunshine Coast Council
  • Toowoomba Regional Council.

For the purposes of the small business grants QLD you are a ‘regional business’ if your principal place of business is any other local government areas within Queensland that is not identified as a SEQ location.

COVID-19 Adaption Small Business Grants QLD – Evidence Requirements

The following outlines the evidence that is needed to be provided to obtain funding in Round 2 of the QLD Small Business COVID-19 Adaption Grant Program:

Turnover: Business annual turnover above $75,000Either business activity statements, business tax return and financial statements or accountants letter (CPA/CAANZ) declaring turnover.
Impact of COVID-19: Business turnover decline of at least 30% for at least on month from 23 March 2020Business activity statements showing reduction, financial reports showing reduction, letter from accountant (CPA/CAANZ) declaring impact. If your business is eligible for JobKeeper you or your accountant will have this information.
Contact Details: For business applying for the small business grantAustralian Business Number (ABN) and GST registration confirmation. Business address must be in Queensland.
Business Details: Key business informationFinancial performance including annual turnover and gross profit, business ownership information, how many employees (must be fewer than 20 employees to be eligible).
COVID-19 Business Impact: How Coronavirus impacted you business.Facts and figures around reduction of staff and their hours, lost turnover / sales, financial losses and additional costs incurred. Data and statistics are especially useful.
Spending the Grant: How the business will use the funding.Type of spending (operational cost versus digital project), start and finish dates of project, copy of invoices and quotes (ensure they include the legal names of the business as well as ABN, logos etc – they will be verified!). Invoices and quotes need to clearly outline the details of the expense or project. Trading stock, salaries and superannuation are not allowable.
Bank Details: For paymentEnsure you have the business banking details available for the grant to be paid into.

Applying for the COVID-19 Adaption Small Business Grants

We recommend the following steps to apply for Round 2 of the QLD small business COVID-19 adaption grants:

  1. Check your eligibility and submit your details
  2. Read the Frequently Asked Questions below
  3. Speak to Quill Group about how we can assist you and how to best allocate funding
  4. Prepare all necessary information and supporting documentation for your application
  5. Ensure you are registered with SmartyGrants prior to 1 July 2020
  6. Submit as soon as possible from 1 July 2020

1 July 2020 – Applications now open

Applications are now open.

If your business is eligible you can apply here: Small Business COVID-19 Adaption Grant Program

Frequently Asked Questions (FAQs) regarding the small business grants QLD COVID-19 adaption grant

The following are the most common questions in relation to this grant and eligibility.

Does the small business have to be located in QLD? What if there are multiple locations?

The business must have a Queensland headquarters. To demonstrate this, the ‘Main Business Location’ of the applicant’s ABN must be listed as being in Queensland on the Australian Business Register(ABR) at the time of application.

If the ABR listing for the applying business does not list Queensland as the main business location, you must provide evidence of a Queensland headquarters in writing to adapt@desbt.qld.gov.au prior to the grant round closing.

Evidence of a Queensland Headquarters includes:

  • a copy of the applicant’s Australian Securities and Investments Commission (ASIC) Company Statement listing a Queensland address as ‘principal place of business’or
  • a letter from the applicant’s accountant confirming the business has changed to a Queensland main business location.

Does the business need to be registered for GST to receive this QLD small business grant?

Yes. The business must be registered for GST at the time of application to be eligible for funding under this program.All businesses that have an annual turnover of $75,000 or greater are required to register for GST.

If you business is not currently registered for GST, however you estimate that your turnover will be above $75,000 for the financial year beginning 1 July 2020, please contact us for further advice as your business may still be eligible but you will need further evidence as part of your application.

Is the grant taxable income of the business?

Yes. The grant income received by successful applicants is assessable income of the business, however to be eligible the business will either incur expenses (or already has incurred expenses) relating to expenditure which is typically tax deductible and therefore offsets the income.

How is GST treated on the small business grants?

Grants are not subject to the GST. Therefore, GST is not payable and grant funding will not compensate for any GST spent by the business. The grant amount is GST exclusive.Your business will, or will have, already claimed back the GST on applicable expenses.

What evidence is needed to show my business turnover is above $75,000 for this grant?

Your application must include a Business Activity Statement (BAS), tax returnor dated accountant letter on letterhead, to demonstrate that your business has an annual turnover of more than $75,000.Accountant letters must be from members of CPA Australia, Chartered Accountants Australia & New Zealand or the Institute of Public Accountants.

Can I submit an application without all necessary evidence?

No. You must submit a completed application, which includes all supporting evidence as requested in the application form,in order to be considered for the grant. Failure to submit complete applicationswill result in delays to processing and in the interim funds may be exhausted.

Can an accountant or other supplier apply for the grant on my behalf if I give permission?

No.  Although business advisors and accountants such as Quill Group can assist and provide help with your application, the person submitting the application form must be a representative (director etc) of the business applying for the COVID-19 adaption small business grant QLD.

If my business receives this small business grant, what must I do after?

The following actions and reporting are required:

  • enter into a funding agreement with the Department of Employment, Small Business and Training
  • purchase the product/s or service/s in full as per the funding agreement
  • deliver the project as per the funding agreement
  • complete a final acquittal within one month of the project completion date
  • complete a follow-up survey six months after the Program has finished.

When will funding be available and how will payments be made?

If your application is successful, the funding will be provided directly to the applicant. To fully acquit your grant you will be required to submit an acquittal report through SmartyGrants that includes receipts.

Businesses will be able to claim accelerated depreciation on new assets for the remainder of the calendar year under the latest extension to the $150,000 instant asset write-off program unveiled by Treasurer Josh Frydenberg.

After expanding the program from assets worth $30,000 to $150,000 in response to the COVID-19 pandemic in March, the federal government has now extended the deadline for making claims from July 1 to December 31.  Previously the $150,000 write-off was due to expire at 30 June 2020.

What is the $150,000 instant asset write-off?

The $150,000 instant asset write-off allows small businesses (with an annual turnover of less than $500 million) to claim an immediate tax deductions for new or second-hand plant and equipment asset purchases such as vehicles, tools and office equipment.

The assets must first be used, or installed for use, in the income year you’re claiming for – i.e. to claim the $150,000 instant asset write-off for an asset for the 2020 financial year, the asset must be purchased and installed (where applicable) by 30 June 2020.

The instant asset write-off has now been extended to 31 December 2020, meaning eligible assets can be purchased prior to the end of the current calendar year to enable the immediate tax deduction in the 2021 financial year ending 30 June 2021.

How do you calculate the asset write off?

The amount you can write-off will depend on when the asset was purchased and the associated threshold amount. Thresholds and eligible turnovers changed on 12 March 2020, check the ATO website for details.

For example, if your company’s turnover is under $500 million and you purchase an eligible asset for $140,000 (excluding GST) on 1 June 2020 (and install it ready for use by 30 June 2020), then a deduction of $140,000 can be claimed. If the company is subject to a tax rate of 27.5% then this should reduce the tax payable by the company for the 2020 income year by $38,500.

Instant asset write off for motor vehicles (cars)

When calculating the instant asset write-off for a vehicle the deduction is limited to the the motor vehicle cost limit of $57,581 for the 2019-20 financial year and $59,136 for the 2020-21 financial year.

The business use percentage of the asset also needs to be taken into account in calculating the deduction. For example, if a sole trader acquires a car for $40,000 but only expects to use it 80% in the business then the immediate deduction would be $32,000.

If your business is registered for GST, then you do not include the amount of claimable GST for the instant asset write off for motor vehicles.  For example if the vehicle cost $40,000 (100% business use) the amount of GST would be $3,636 and the instant asset write off amount would be $36,364.

The car cost limit also limits the amount of GST that can be claimed, and for the 2019-20 financial year the maximum claimable GST on a motor vehicle is $5,234 (1/11th of $57,581). The maximum claimable amount for motor vehicles purchased after 1 July 2020 (financial year 2020-21) is $5,376 being 1/11th of $59,136.

Luxury car tax also applies for any vehicles purchased over $67,525 during the 2019-20 financial year.  For further information check the thresholds on the ATO website: Luxury car tax rate and thresholds

Please note that the above instant asset write off cost limit only applies to cars which are defined as motor vehicles (including four-wheel drives) designed to carry a load of less than one tonne and fewer than nine passengers. Different rules apply to commercial vehicles designed to carry one tonne or more (utes, utilities, trucks) as well as vehicles such as minivans and buses designed to carry nine or more passengers.

Financing of equipment purchases for the instant asset write-off

For larger asset and equipment purchases we can assist you with finance options through our panel of equipment and motor vehicle finance specialists.

Please contact us or speak to your Quill Relationship Manager for further information.

More Business Tax Planning Tips for Companies, Trusts and Partnerships

As we come out of COVID-19 restrictions its especially critical to squeeze every tax incentive available including the instant asset write-off to ensure your business survives and thrives.

Please also take some time to review the following articles for other business and personal tax planning solutions:

All major asset classes finished positive in the month of May, with equities in particular staging strong rallies. This came in spite of record unemployment, major US cities struggling to contain looting and destruction and another flare up in tensions between China and the US, with Australia also copping some retaliation from China.

The US dollar started falling from mid May versus the trade weighted index, and this has helped Emerging Markets and even the local US markets.

International shares pared their losses for the last three months back to -2.00% reflecting the diversification benefits of holding international assets. This benefit is not only because of the shock absorber effect of the falling Aussie dollar, but also because those foreign markets are less concentrated in financial companies than Australia. The defensive sectors such as drugs, consumer staples and tech all held up much better than banks and property.

Concerns over how well the massive fiscal and monetary stimulus would work held back the performance of banks and finance companies in Australia, but that changed late in May. For the eight weeks from 23 March, the ASX300 Banks index managed to rise only 8.00%. However, from the 22nd, of May until the date of writing (5 June) the Bank index has rallied 23.1% in just two weeks.

Fixed interest markets continued to return to normal in May, with companies again being able to tap the markets for new debt raisings.

Market Update May 2020

 

To provide some perspective on why the markets have rallied so strongly in spite of the fact that we are in the middle of a recession, not only here in Australia but likely globally, we need to look at only one chart. The US Federal Reserve Balance sheet overlaid with the S&P500 stock index.

 

 

The word ‘un-precedented’ has been used a lot lately. Even Aldi are slinging off at the overuse of the word in their latest ads. However, when it comes to the expansion of budget deficits and central bank balance sheets, there is no other word that springs to mind for describing what has happened.

The US Federal reserve balance sheet has exploded by 2.5 trillion dollars from $4.66Tn to $7.16Tr in the ten weeks since March 18, 2020.  While this rate of change has some implications for inflation down the track the immediate goal is to arrest the asset price deflation and central bankers have been very successful at that.

While the central bank balance sheet expansions are alarming, and at some point will have greater consequences, those consequences may not unfold in the time frames that some may expect.  One only has to look at Japan as an example of what could be in our future. The Japanese ten year government bond has been below 1% for over 8 years, and for most of the last four years has been at or below 0%.

Whether that is to be outcome here we do not know for sure. But what we do know is that the price of money is likely to be very low for a long time into the future. If looking at Japan as a model we observe that the Nikkei 225 index made a total return of 1.4% per annum in the 20 years since June 2000. Over the last 20 years, the P/E multiple in Japan has averaged 18x even with such low interest rates. In those market conditions, digging deeper to invest in stocks that still had earnings growth prospects and avoid the stagnant secular losers was the only way to make money. We also think that will be important going forward in Australia.

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