The federal Home Guarantee Scheme was rebuilt from the ground up on 1 July 2024, and the income thresholds that first home buyers need to sit under are now meaningfully wider than they were just 18 months earlier. The change arrived alongside the government’s decision to rebrand the administering agency from the National Housing Finance and Investment Corporation to Housing Australia, and to loosen the definition of a “couple” so that siblings, friends, or two single parents living together can now pool their borrowing power under the same caps. At the same time, the Reserve Bank of Australia has kept the cash rate at 4.35% since November 2023, pushing standard variable rates on owner‑occupier loans to roughly 6.20%–6.60% p.a. for mainstream big‑four products. That rate environment compresses borrowing capacity just when property prices in the capital cities remain 6%–8% above their late‑2023 floor. The income cap therefore operates like a gate: too high and a buyer is locked out of a guarantee place, too low and they cannot service the loan even with the government standing behind 15%–18% of the security. The 2025 tax year is the first full financial cycle under the revised rules, making a precise understanding of the dollar limits—and how lenders actually verify income—the single most important number to check before lodging an application.
Income Caps That Define the 2025 Places
Housing Australia allocates 35,000 guarantee places each financial year under the First Home Guarantee (FHBG), 10,000 under the Regional First Home Buyer Guarantee (RFHBG), and 5,000 under the Family Home Guarantee (FHG). The same income ceilings now apply to both the FHBG and the RFHBG, while the FHG runs its own separate threshold. The caps are not a target; they are a hard line. A dollar above the limit on the Notice of Assessment used in the approval process will make the application ineligible.
Single Applicants Under FHBG and RFHBG
A single applicant—someone buying alone, not jointly—must show total assessable income of no more than $125,000 in the financial year preceding the application. That number rose from $120,000 on 1 July 2024, as legislated in the Treasury Laws Amendment (Housing Measures No. 1) Regulations 2024. The $5,000 lift may appear modest, but for a single borrower on $122,000 whose borrowing capacity was previously stalled at around $480,000 with a 5% deposit, the adjustment unlocks an extra $20,000–$25,000 in serviceable loan size. Partners in a joint application under FHBG or RFHBG must stay at or below a combined income of $200,000, up from the prior $180,000 cap. The joint limit applies whether the borrowers are married, in a de facto relationship, or any two eligible individuals who form a “couple” under the expanded definition that took effect from 1 July 2024. That means two siblings or two friends buying together are now treated in exactly the same way as a married pair for income-testing purposes.
The Family Home Guarantee Ceiling
The FHG is reserved for single natural or adoptive parents with at least one dependent child. Its income cap is $125,000— unchanged by the 2024 regulatory package. The ceiling applies to the single parent applicant alone; no joint income test is run because the scheme does not allow joint applicants. Since 1 July 2024, however, a single parent who is buying with another single parent (each with their own children) can apply under the FHBG or RFHBG instead, using the $200,000 joint income limit, providing both borrowers meet the first‑home‑buyer test. That small-loop regulatory change has materially broadened the accessible cohort without needing to adjust the FHG cap itself.
Child Support and the Income Calculation
Lenders processing a guarantee application are required to follow Housing Australia’s Home Guarantee Scheme Lender Operating Manual, which instructs them to gross up any tax‑free child support received. The grossed‑up amount—not the cash paid—must be added to taxable income. For a single parent receiving $18,000 in non‑taxable child support, the gross‑up factor of 1.25 turns that into $22,500 for the purpose of the $125,000 ceiling. That single adjustment can tip an applicant over the line, so accurate pre‑checking on the Notice of Assessment is essential.
What Counts as Income—and What the Banks Will Ignore
Lenders do not simply look at a payslip summary figure. They are required to reconcile the applicant’s declared income with the latest Australian Taxation Office Notice of Assessment. Housing Australia’s directive, re‑issued on 1 July 2024, makes the NOA the base document for eligibility, with supplementary evidence allowed only for a new job, a promotion, or a recent return to work after parental leave. The 2025‑year process therefore treats income verification as a two‑step test: statutory income for the cap, then lender‑assessed borrowing capacity using ongoing income.
Salary, Overtime, and Bonus
A base salary is taken at 100% in both the cap test and the serviceability calculation. Overtime, commissions, and bonuses are treated with more scepticism. Most big‑four lenders, including CBA and Westpac, will shade variable earnings to 80% for serviceability unless the applicant can show a consistent two‑year history via ATO assessments. For the income‑cap test, however, the full taxable amount that appears on the NOA is counted—no shading is applied. That mismatch means an applicant can sit comfortably under the $125,000 ceiling but still fail the loan‑serviceability hurdle because the bank’s assessment income is lower.
Rental Income and the 80% Rule
Where the guarantee is used for a property that generates rental income—most commonly under the FHG when a single parent purchases a home with a granny flat—only 75%–80% of gross rent is accepted by lenders for both the cap and serviceability. The exact figure varies by lender policy: NAB applies a flat 75% haircut to investment rental income, while some non‑banks such as Liberty Financial use 80% after deducting a proxy for holding costs. For a property earning $450 per week in gross rent, a 25% haircut reduces the counted figure to $17,550 per annum, well below the $23,400 headline. A borrower relying on rental income to stay under the cap should calculate using the conservative 75% method to avoid a late‑stage ineligibility finding.
Self‑Employed Income and the 12‑Month Trap
Self‑employed applicants need a full financial‑year Notice of Assessment and, in most cases, the matching tax return and ATO income statement. Housing Australia does not accept interim management accounts or BAS statements on their own. That rule bites hardest for sole traders whose income jumped in the current year above the prior‑year NOA figure. If the 2023‑24 NOA shows $115,000 but the 2024‑25 year will exceed $125,000, the applicant can still use the old NOA provided it is the most recent available at the time of formal approval. However, the lender will also demand a trading‑year‑to‑date profit‑and‑loss statement for serviceability, creating a second, often‑lower, income figure that may collapse borrowing power. The dual‑track verification makes pre‑qualification with a broker critical.
Serviceability Maths Under the Guarantee
A guarantee place replaces Lender’s Mortgage Insurance, but it does not replace the prudential assessment. Every applicant must still satisfy the lender’s serviceability test, which is governed by APRA’s Prudential Standard APS 220 and the prevailing interest rate buffer. As of January 2025, APRA has not altered the serviceability buffer from the 3.0 percentage points it set in October 2021. That means any borrower, even one with a 5% deposit under the FHBG, is assessed at the higher of the product rate plus 3% or a floor rate—typically around 9.0%–9.5% p.a. for mainstream variable loans.
How the Buffer Caps Borrowing Capacity
On a $700,000 purchase with a $35,000 deposit and no LMI, the loan amount is $665,000. Assessed at 9.25% p.a. over a 30‑year principal‑and‑interest term, the monthly repayment used for serviceability is $5,480. A single borrower earning $125,000 gross has a monthly gross income of $10,417; with no other debts, a $5,480 commitment equates to a debt‑service ratio of 52.6%, exceeding most lenders’ soft cap of 40%–45% for net income. In practice, that borrower’s maximum loan sits closer to $510,000 unless they have negligible living expenses or additional income sources. The income cap of $125,000 therefore often becomes the binding constraint before the scheme limit itself is breached.
The Interaction with Debt‑to‑Income (DTI) Caps
The big‑four banks operate internal debt‑to‑income limits that can override the scheme’s parameters. CBA and Westpac generally cap DTI at 7.0x for borrowers with an LVR above 80% (which the guarantee avoids), but even for a 95% LVR loan under the guarantee, some non‑bank lenders such as Pepper Money enforce a hard 6.5x DTI ceiling. For a single applicant earning $125,000, that translates to a maximum total debt of $812,500. However, because the guarantee property must be a principal place of residence and often carries a lower valuation in stress‑testing, the effective DTI ceiling is rarely the limiting factor unless the borrower simultaneously holds a large HECS‑HELP debt or a car loan. A HECS debt of $50,000 reduces after‑tax income by roughly $4,200 per annum, forcing the DTI calculation lower. Borrowers should run both the serviceability buffer and DTI numbers with a lender’s calculator before submitting.
Comparing the Three Schemes’ Fine Print in 2025
The three guarantees share a common application process through Housing Australia’s panel lenders, but their income, property‑price, and applicant‑status rules diverge in ways that can steer a borrower from one scheme to another.
First Home Guarantee: The Workhorse
The FHBG allows a deposit as low as 5% without LMI; the government guarantees up to 15% of the property’s value. The income cap is $125,000 for singles and $200,000 for joint applicants. The property price cap is indexed and varies by state—$900,000 in Sydney, $800,000 in Melbourne, $700,000 in Brisbane, and $600,000 in Perth, for example. A single earner wanting a Sydney unit at the $900,000 ceiling would need a $45,000 deposit plus stamp duty. At the $125,000 income cap, the maximum loan after a 5% deposit is $855,000, which with a 6.40% p.a. product rate yields a monthly repayment of $5,350, but serviceability at 9.40% p.a. would be $7,120—requiring a gross income of roughly $165,000 to pass. That arithmetic means the effective maximum purchase price for a single FHBG applicant is often $150,000–$200,000 below the scheme’s stated property cap.
Regional First Home Buyer Guarantee: Same Income, Different Map
The RFHBG copies the FHBG income caps of $125,000 / $200,000, but it is restricted to properties in defined regional areas based on the Australian Bureau of Statistics’ Remoteness Structure. The key advantage is that the property price cap sits above the FHBG cap in several regional centres—for instance, $750,000 in regional NSW versus $900,000 in metropolitan Sydney. For a couple on a combined $190,000 income, the RFHBG can unlock a larger home than the FHBG in the same postcode, providing the property is outside the metropolitan boundary. The guarantee is also 15% from the government, with a minimum 5% deposit, exactly mirroring the FHBG structure.
Family Home Guarantee: 2% Deposit with a Different Calculation
The FHG is the outlier: it requires only a 2% deposit, with the government guaranteeing 18% of the value. The income cap remains $125,000 for the single parent applicant. Because the deposit is so low, the loan size balloons to 98% of the purchase price, which lifts the serviceability hurdle sharply. A $600,000 purchase with a $12,000 deposit results in a $588,000 loan. At a 9.25% assessment rate, the monthly repayment is $4,840, which consumes roughly 80% of a $125,000 gross monthly income before any other expenses. Most single parents require family tax benefits or child support to meet the serviceability test, and those income streams must be documented with Centrelink statements dated within 30 days of application.
Actionable Steps Before Lodging a Pre‑Approval
The income limits are only the starting point. A guarantee application can be scuttled by a mismatch between the ATO income and the lender’s serviceability figure. The following steps can head off a decline before it appears.
- Pull the 2023‑24 Notice of Assessment now. The NOA is the official document that Housing Australia will use for the income cap test in the first half of 2025. If the figure is within $3,000 of the $125,000 or $200,000 limit, run a projection for the current year and speak to a broker about whether a lender would accept updated payslips without triggering a cap breach.
- Stress‑test borrowing capacity at a 9.25% p.a. assessment rate. Download the calculator from a panel lender such as NAB or Commonwealth Bank, input the actual product rate (likely 6.29%–6.49% p.a.), and add the 3% buffer manually. If the surplus after living expenses falls below $500 per month, the loan will probably fail.
- Check the property price cap against the suburb. Housing Australia publishes a searchable postcode tool updated every quarter. The cap can shift with market movements, and a $10,000 difference can be fatal for a guarantee approval. Confirm the cap on the day of signing a contract.
- If self‑employed, lodge the 2023‑24 tax return before applying. Even if an extension exists, lenders will not waive the requirement for a finalised NOA. Unfinalised returns result in an automatic deferral of the application.
- Get a written pre‑check from the lender on income‑cap compliance. Many bank mobile lenders still rely on verbal estimates, leading to a formal rejection weeks later. A simple email from the lender’s credit team confirming the income figure is within Housing Australia’s limit can save a deposit being lost on an unconditional contract.