KiwiSaver withdrawal for first home buyers
Solicitor Jasmine Daroch
A brief overview of KiwiSaver
KiwiSaver is a voluntary, work-based savings scheme which is designed to help you with your long-term saving for retirement. You have the freedom to choose from a variety of different KiwiSaver providers with whom to invest your money with. For example many New Zealand banks are KiwiSaver providers and offer a KiwiSaver scheme to their customers.
The money in your KiwiSaver account is a combination of the contributions made to your account, plus or minus any investment returns, and minus any withdrawals/fees/taxes. The contributions are made up in the following way:
- Your personal contributions (the amount deducted from your pay or the amount you pay directly);
- The government contributions; and
- Your employer’s contributions (an amount your employer has agreed to contribute).
If you are employed, your KiwiSaver contributions can be deducted straight from your pay. You can choose a rate of either 3%, 4%, 6%, 8% or 10% and this percentage is deducted from your pay and invested into your scheme with your KiwiSaver provider. If you’re self-employed or not working, you can discuss with your KiwiSaver provider how much you want to contribute, and you can make those payments directly to them.
First-home withdrawal eligibility
If you have been a KiwiSaver member for three or more years, you can withdraw some of your money from your KiwiSaver scheme to purchase your first home (which is not an investment property). This withdrawal can be used towards the payment of the deposit for the purchase or it can be used as part of the funds paid on settlement.
Many KiwiSaver providers will have the following general requirements for making a first-home withdrawal (these requirements may vary between providers):
- You have been contributing to your KiwiSaver scheme for at least three years;
- You are a first-time property or land owner;
- The property or land is in New Zealand;
- You’re going to live in the home you’re buying or build a home to live in on the land you’re buying; and
- It’s the first time you have made a KiwiSaver withdrawal to purchase a home.
If you have owned a home before, in certain circumstances you could still be eligible to withdraw money but the eligibility for this would be dependent on the KiwiSaver provider you are investing with.
Making an application for first-home withdrawal
Different providers will have different procedures and criteria for making a first-home withdrawal and this process can get confusing, especially when there are complicated forms to fill out. However we can assist you with this process and manage the application for you, so you can focus on purchasing your first home stress-free.
Most providers will require the applicant to fill an application form for a first-home withdrawal. This application form will need be signed by the applicant and the applicant’s solicitor. Additionally, the application will require a verified copy of the applicant’s ID and address. Once the application form has been completed and signed, it is then submitted by your solicitor to the KiwiSaver provider on your behalf.
After the application has been approved, the KiwiSaver funds will be deposited straight into your solicitor’s trust account on the required date. Depending on the applicant’s preference, these funds will be allocated towards the deposit or the settlement funds.
Most applications take at least 10 working days to process and approve, and in some cases it can take a further 3 to 5 working day for the KiwiSaver funds to appear in your solicitor’s trust account. Therefore we strongly recommend that applicants always take the above time frames into consideration when setting down the conditional dates and the settlement date for an agreement for sale and purchase.
After 3 years of being a member of a KiwiSaver scheme, you may also be entitled to the KiwiSaver HomeStart grant. These grants are administered by Housing New Zealand and there are two types of HomeStart grants:
- For purchasing an existing home, the grant is between $3,000 and $5,000 based on $1,000 for each year of contribution to your KiwiSaver scheme.
- For building or purchasing a new home, or for purchasing land to build a new home on, the grant is between $6000 and $10,000, based on $2,000 for each year of contribution to your KiwiSaver scheme.
There are a number of requirements to be eligible for the HomeStart grant, but the three key eligibility requirements are:
- You have been contributing the required minimum amount to your KiwiSaver scheme for at least 3 years;
- You have a household income (before tax) of $85,000 or less per year (for one person), or a combined household income of $130,000 or less per year (for two or more people); and
- The purchase price of the property is within the regional house price caps.
To find out if you are eligible for the HomeStart grant or to apply for the HomeStart grant, contact Franklin Law who can assist you with the entire application process. The full eligibility checklist for the HomeStart grant can also be found on the Housing New Zealand website https://www.hnzc.co.nz/ways-we-can-help-you-to-own-a-home/kiwisaver-homestart-grant/homestart-grant-eligibility-checklist/