Economic Principles and Decision Making Report 2022

Running head: ECONOMIC PRINCIPLES AND DECISION MAKING
Comparative analysis of the First Home Owners Grant (FHOG) and the First Home Plus
(FHP) facilities in Australia
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ECONOMIC PRINCIPLES AND DECISION MAKING
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Introduction
In the housing market of Australia, First Home Owners Grant (FHOG) and First Home
Plus (FHP) scheme are two major assistance schemes for the first time home buyers or owners.
While FHOG is entirely a grant for the first time home owners, FHP is a facility for earning
concessions on the transfer duty to the first time buyers of new as well as existing homes in the
states and territories of Australia (Revenue NSW, 2020). Both the schemes have some eligibility
requirements, some similarities as well as some differences. The report presents a comparative
discussion on FHOG and FHP on the basis of the eligibility criteria, similarities, differences and
impact on the demand, supply and price elasticity of demand in the housing market. It will also
discuss the market structure for the FHOG scheme followed by the critical evaluation of the
statement on stamp duty by Ken Henry.
Discussion
Comparison between FHOG and FHP
First Home Owner Grant (FHOG) is a scheme for assisting the first home buyers in
purchasing housing property in Australia. It was established in 2000. This scheme offsets the
effects of GST on the home ownership for the first home buyers. Each of the Australian states
and territories has different legislation, eligibility criteria and own exemption rules for FHOG.
This is a grant, and hence, the first home owners are not under any obligation to repay the grant
and thus, it is different from a loan and also does not incur any interest or debt. The aim of this
scheme was to ease some financial burden off the first home owners (Revenue NSW, 2020).
The First Home Plus (FHP) scheme is another assistance scheme for the first home
owners in Australia that is based on concessional rates on the transfer duty. This scheme is

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applicable for purchases that are made before January 1, 2012. This scheme is applicable for the
first buyers of new as well as existing homes, while the purchase was made between July 1, 2009
and December 31, 2011and had a land or home value below the applicable threshold of the
scheme (revenue.nsw.gov.au, 2020).
The eligibility criteria for FHOG are different in different states and territories, however,
some of the common eligibility criteria are as follow:
 Applicants must be buying or building their first home
 Each of the applicant must be above 18 years
 At least one of the applications must be Australian citizen or permanent resident of
Australia.
 Each applicant must apply as individual and not as trust or company
 At least one applicant must buy the property as primary residence for continuous 6
months with 12 months of purchase settlement or construction.
 The applicants and their spouses should not have owned residential property or land
before and after July 1, 2000, and occupied that for 6 months.
 Total value of the residential property must not be more than the grant amount
For the FHP, the eligibility criteria are:
 The purchase must have been made between 1st July, 2009 and 31st December, 2011
 Age of applicants must be over 18 years
 Applicants should be individuals and not a company or trust
 The property must have been purchased by the applicants alone or jointly
 At least one of the owners must be Australian citizen or permanent resident

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 Each applicant must be staying in the property for continuous 6 months within 12 months
of purchase or building the new home
The above criteria for both the grant schemes are similar. However, the differences lie in
the conditions for a home to be marked new in case of FHOG and the transfer duty in case of
FHP. For obtaining the FHOG, the applicants are not eligible for the grant, if they are buying any
exiting home. The property will be considered new, only if that was never sold before and if
there was no occupant before the buyer, including the builder or tenant (Qld.gov.au, 2020). On
the other hand, FHP is applicable for purchasing both the new and existing homes. In other
words, unlike in FHOG, buyers will be eligible for receiving concessional rates on the transfer
duty while purchasing a home first time, and property can be new or existing.
The other differences include in the timeframe of occupancy of the property purchased,
duration of living in the purchased property, timing for applying for the grant, time of renting the
property before moving in and renting rooms. In case of FHP, the applicant must occupy the
purchased residential property within 1 year of the transfer date, and must live in the property for
the 1 year. The applicants get five years for applying for a refund if the concession wasn’t
claimed at the purchase time. Moreover, for FHP, the applicants are not allowed to rent out the
whole property before moving in and a single room after 1 year of moving in
(revenue.nsw.gov.au, 2020). On the contrary, for FHOG, the applicants must occupy the
purchased home or newly built home within either 1 year of title registration, or 1 year after the
final inspection. The applicants must also live in the new property for continuous 6 months. They
get 1 year after the transaction is completed to apply for the FHOG. Moreover, the applicants
cannot rent out the property before moving in, but, they can rent out one or more than one rooms