From 1 July, all applications for the FHLDS will require a Notice of Assessment for the 2019-20 financial year, a requirement that one franchisee labels “restrictive” and “unworkable”.
The National Housing Finance and Investment Corporation (NHFIC), the administrative body overseeing the government’s First Home Loan Deposit Scheme, has revealed that from 1 July, applications for the scheme will require a borrower’s Notice of Assessment for the Australian Taxation Office (ATO) for the 2019-20 financial year.
This decision has been flagged to The Adviser by brokers, who facilitated 44 per cent of all 10,000 applications in the first round of the FHLDS – which began on 1 January 2020 – with one franchisee noting that the requirement will slow the intake of applications.
From 1 July, 10,000 new places within the scheme will open up for first home buyers (FHBs) who have saved a deposit of at least 5 per cent, with the government set to guarantee the difference between their deposit and the full 20 per cent that is usually required.
The guarantee scheme allows FHBs to enter the property market without a full 20 per cent deposit, as well as erasing the need to pay lenders mortgage insurance, which will see buyers entering the market sooner than they would have otherwise.
One broker has contacted The Adviser to say that the new document requirement under the second round of the FHLDS is “restrictive” and “unworkable”, due to the work required in order to lodge a tax return well in advance of the 31 October due date and have a NOA prepared by 1 July.
Mark Edbrooke, franchisee and senior broker of Aussie in Paddington, stated that he believes this requirement could mean that applications for the scheme might not flow through until “weeks or months” after its launch.
Mr Edbrooke highlighted that to be in a position to file your tax return, you first need to access a range of documents from various sources, including your income statement, interest earned records, private health insurance tax statement, and so on, as well as find the time to put your documents together and lodge with the ATO.
“Once it is lodged, it is going to be a minimum of 14 days generally before the ATO has processed your return, and then you receive your NOA,” Mr Edbrooke said.
He stated that he believes that it would be more appropriate to follow the same document requirements as most Australian lenders, which require the most recently available Notice of Assessment, and will continue to accept the previous year’s assessment up until 31 December.
Instead, Mr Edbrooke said, “It could work this way: If the request for a scheme reservation were made before 31 October, then they would accept the NOA issued for the prior tax year. But if the request for a scheme reservation were made after 31 October, then they would require the NOA issued for the latest tax year.”
This would mean that applicants who are ready and willing to purchase their first property when the scheme resets in July will be able to without the hassle of rushing through the tax lodgement process.
“The FHB Australian Citizen is seeking support, and rules need to be set on qualifying for that support,” Mr Edbrooke said.
In response to The Adviser’s questions on the matter, a spokesperson from the NHFIC confirmed their stance on the NOA requirement, stating that the previous financial year's NOA has always been required under the scheme as evidence of their taxable income.
“We understand some lenders and brokers have been getting on the front foot and advising customers to get their tax returns in as soon as possible should they wish to apply for a place under the Scheme," the spokesperson said.
First round FHLDS stats
Shortly after the announcement that all 10,000 places in the first round of the scheme had been filled, the Minister for Housing and Assistant Treasurer Michael Sukkar released some of the key NHFIC data from the round.
The data specified that brokers were the most common channel of accessing the scheme, with 44 per cent of all borrowers in the scheme applying for their place via the broker channel.
Notably, data from the NHFIC showed the banks taking preference over brokers in the first seven weeks of the scheme, when the non-major participating lenders had only just begun to accept applications for the scheme.
According to Mr Sukkar, scheme-backed loans were provided in every state and territory around Australia, in both capital cities and regional areas, with 3,144 places awarded in NSW, 2,306 in Victoria, 2,111 in Queensland, 550 in Western Australia, 413 in South Australia, 200 in ACT, 183 in Tasmania and 35 in the Northern Territory.
He said the average income of applicants are “well below the scheme’s caps”, with the average income of single applicants being $67,387 and for couples $109,525.
Over half (58 per cent) of the those in the scheme were under the age of 30, while 12 per cent were over the age of 40.
“Despite the COVID-19 health crisis causing a slight flattening of demand in the scheme in mid-March, first home buyers have shown huge confidence in the housing market and have moved quickly to secure the remaining guarantees available before the 30 June deadline,” Mr Sukkar said.
[Related: COBA releases FHLDS figures]
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Hannah Dowling is a journalist for The Adviser and Mortgage Business.
Prior to joining Momentum Media, Hannah worked as a content producer for a podcast catering to property investors. She also spent six years working in the real estate sector at a local agency.
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