Helen Twose 's Opinion

Personal finance and KiwiSaver columnist at the NZ Herald

KiwiSaver: 'Second chance' home rules tough

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Owning a section can be a stumbling block when seeking to withdraw your savings to build a house.

Money transferred to KiwiSaver from an Australian super fund cannot be withdrawn to use as part of a first home deposit. Photo / Brett Phibbs
Money transferred to KiwiSaver from an Australian super fund cannot be withdrawn to use as part of a first home deposit. Photo / Brett Phibbs

I have recently relocated from Melbourne to Christchurch.
I intend to transfer my Australian superannuation funds into a New Zealand KiwiSaver fund to then use to help build my first home in Christchurch.
I bought an empty section with no house on it five years ago in Christchurch, my first ever land/house purchase anywhere in the world.
I now intend to build a new house on this empty section, which will be my first home, to live in myself.
If I do bring these funds over into a KiwiSaver account, will I be able to use them to help build a house on this section I already own?

This is very much a "two for the price of one" question because it touches on the KiwiSaver rules for using the funds to buy a home, plus those around bringing Australian superannuation funds back to New Zealand.

While KiwiSaver is at its heart about saving for retirement it is possible to dip into the money early to help during times of financial hardship, serious illness, moving permanently overseas, or, as you want to do, to buy your first home.

I asked Fiona Oliver, general manager, wealth management at AMP about bringing your Australian superannuation savings to New Zealand and using it to build a home.

"This is a great question, as it highlights a query that is being asked by more and more people as purchasing land and then building a home is becoming increasingly popular.

"In order to qualify for the 'withdrawal for purpose of purchase of first home' as outlined under the KiwiSaver Act you can make a withdrawal if three years or more have passed since Inland Revenue received your first contribution to a KiwiSaver scheme.

"If you qualify then you can withdraw some or all of your savings (excluding the kick-start and the member tax credits)" says Oliver.

So, if you have been in KiwiSaver for at least three years then the contributions you and your employer have made, plus any investment earnings could be available to pay for your first home or buying land to build a house on.

To release your funds for a first home purchase your KiwiSaver provider will need to see:

*A copy of the sale and purchase agreement that shows you are the purchaser.
*An undertaking from your lawyer the sale and purchase agreement is unconditional.
*An undertaking from your lawyer that the withdrawn KiwiSaver funds will be paid to the seller as part of the purchase price or repaid to your KiwiSaver provider if the sale does not got through.

"While you rightly point out that you currently only own land, and not a home, unfortunately the KiwiSaver Act outlines that you must never have owned a home or land before in order to be eligible under the first home withdrawal criteria," Oliver says.

"There are some exceptions around the land ownership being in a bare trustee or leasehold structure, but based on the way you phrased your question it suggests you haven't set up your assets in this sort of structure."

There are options to access KiwiSaver funds if you have previously owned a home but no longer do, haven't tapped your KiwiSaver for house-buying assistance previously and are in the same financial position as a first-home buyer.

The criteria are tougher and Housing New Zealand, who administers the KiwiSaver withdrawal for previous homeowners, will run through a checklist to assess your financial position.

The "second chance" option is only available to those on a lower income with limited assets.

The Housing New Zealand website - www.hnzc.co.nz - is the best source of information on whether you are eligible to withdraw some of your KiwiSaver funds when you've owned a house before.

Housing New Zealand also run the first home deposit subsidy and Welcome Home loans, which are both aimed at helping individuals and couples on lower incomes into their first home.

Right, back to your original question about the Australian-sourced funds and it isn't good news.

"I hate to deliver a blow to your plans to build in Christchurch, but savings transferred to KiwiSaver from an Australian complying superannuation fund cannot be withdrawn under this withdrawal type either," says Oliver.

Under the current rules those Australian-sourced funds will be available to you at 60 rather than the New Zealand retirement age of 65, but you won't be able to use that money to buy a house or land.

*Disclaimer: Information provided is stated accurately to the best of the respondent's knowledge at the time of publication.
It is general in nature and should not be construed, or relied on, as a recommendation to invest in a particular financial product or class of financial product. Readers should seek independent financial advice specific to their situation before making an investment decision.

To have your KiwiSaver questions answered by the NZ Herald's panel of industry players email Helen Twose, helentwose@gmail com.

- NZ Herald

Helen Twose

Personal finance and KiwiSaver columnist at the NZ Herald

Helen Twose is a freelance business journalist who writes regularly about KiwiSaver and entrepreneurial companies. She has written for the Business Herald since 2006, covering the telecommunications sector, but has more recently focused on personal finance and profiling successful businesses.

Read more by Helen Twose

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