JUST imagine children as young as one year old owning new houses, partly paid for by the Australian government. Ridiculous? Unbelievable? Maybe so because the toddlers can’t even write their names, let alone sign the documents for a piece of land on which to build a house.
Yet the contracts clearly show they are the owners of the houses. One of them is in Perth and the other in Melbourne.
And more babies may find themselves in this bizarre situation if it is allowed to go on.
Already, 102 children under the age of 17 have obtained a federal government grant of A$7,000 (RM18,373) each to buy their first home.
The irony is that it is not the intent of the scheme to give them the grant. What happens is that a loophole in the rules has allowed people buying their second or third homes to use the names of their children as first homebuyers to qualify under the scheme.
This emerged recently during the crosschecking of information in the computer database.
It has now forced the state governments of Western Australia, Victoria, Queensland and Tasmania, which administer the scheme in their jurisdictions, to move quickly to plug the loophole.
Taken by surprise at such a racket, Federal Treasurer Peter Costello remarks somewhat cynically: ”Aside from the fact that the toddlers can’t sign their names, maybe they’re putting an X on (the documents), maybe they’re doing finger-painting on the contracts.
“What are we doing? Are we going around the kindergarten saying 'dip your finger in the paint and sign this contract for (the) law?'
“As far as I know, those under 18 years of age are not bound by any contract. They don’t have the capacity to sign contracts.”
Then, in an angry mood, the treasurer insisted that the grant money be returned to the government.
But he has no hope of getting it back legally from the parents of the children whether or not he classifies the matter as fraud.
This is because the rules do not stipulate that the applicant must be an adult or a person of a certain age.
They do not have a means test. Nor is there a limit on the value of the property that the applicant can buy under the scheme.
As a result, the wealthy have already taken advantage of the first home ownership grant to buy million-dollar homes or investment properties.
Official figures show that the wealthy have bought 23 A$1mil (RM2.6mil) houses, partly funded by the grant.
Asked about this on a television interview last week, Costello was obviously evasive.
“Let’s leave aside the millionaires,” he said in brushing the question away. “Let’s come to the toddlers because the Victorian government is attempting to imply that the Commonwealth has approved money going to toddlers.”
However, the truth is that the federal government is equally to blame for the lack of action to close the loophole, which was first discovered more than two years ago.
The state government of New South Wales (NSW) warned then that the guidelines for the scheme, issued by Canberra, were so broad and vague that unscrupulous people could get the grant under the names of their children.
The eligibility criteria had to be tightened, which the NSW government had done immediately. Memos about this, with a copy of the guidelines, were sent to the federal government as well as to other state governments.
But nothing happened since then until last week’s revelation of homes bought under the names of toddlers. The state governments – not the federal government – immediately took the first step to crack down on the scheme.
When the amended rules will come into force is not known yet.
In Western Australia, 32 children aged between one and 17 have technically received first homebuyer grants totalling A$224,000 (RM587,940).
In all, 56,000 people in the state have been given the grant since its inception as a GST (general and services tax) reform package in July 2000.
Interestingly, 23 of the recipients in Western Australia have used the grant to build or buy homes worth A$1mil or more each, and a further 422 have used it to buy homes worth between A$500,000 and A$1mil (RM1.3mil and RM2.6mil) each.
Like some welfare schemes, some people have tried to cheat the government by giving false information to obtain the first homebuyer grant.
The state government has so far prosecuted 51 people for this offence and 98 others have been ordered to repay the money because they have rented out the property while staying with their parents.
In Victoria, 38 children, aged between one and 10, and 32 others aged between 10 and 17, have technically received the grant.
A total of 115,000 people in Victoria have benefited from the scheme since its inception.
Nationally, the scheme has paid out a total of A$3.5bil (RM9.2bil) in first homebuyer grants.
Both Western Australia and Victoria will tighten the scheme even further by legislating that the applicant must be 18 and over and the value of the home to be purchased is not over A$500,000.
Some of the exceptions, however, include special circumstances where teenagers who are working and children who have received inheritances, wanting their own first homes.
The argument over who is to blame for the grant going to toddlers will continue as long as Costello wants the state governments to refund the money to the federal government because the states have “breached their obligations to prevent abuse” of the scheme.
But Treasurers John Brumby (Victoria) and Eric Ripper (Western Australia) blame the federal government for the scheme’s shortcomings, saying the flaws are its responsibility.