KiwiSaver: First home snag with Australian funds

Money saved into an Australia super fund can't be used to buy a home here in New Zealand. Photo / Brett Phibbs

My husband and I moved back home to New Zealand from Australia in January 2014.

When we tried to bring our super across there was a lot of confusion (mainly from bank here) as to rules regarding what we could access should we want to use funds to purchase a home.

Does the rule apply to expats returning home that they can access funds after three years for purchasing a home?

One of the perks of KiwiSaver is being able to get into that retirement money early to buy a first home.

This is not an option for Australian superannuation savers, although the option is being debated there at the moment.

Sarah Whitelock, a principal at KiwiSaver provider Mercer, explains how the rules around the KiwiSaver first-home withdrawal would apply to someone in your situation.

"Part of the requirements for making a first-home withdrawal is that you must have been a KiwiSaver member for at least three years.

"This doesn't include the time you have been a member of a super scheme in Australia.

"So your countdown of three years needs to start from the date you joined KiwiSaver.

"It is also important to note that the current legislation means that Australian-sourced funds cannot be withdrawn for the purposes of a first-home withdrawal.

"This means that if you have transferred your Australian super funds into your KiwiSaver you will not be able to use these funds to purchase your first home.

"However, you will be able to withdraw any interest you earn on the transferred funds," Whitelock says.

Since 2013 it has technically been possible to move your KiwiSaver or Australian superannuation savings across the Tasman when you move - "transtasman portability" in bureaucratic-speak.

I say "technically" because currently the situation is that KiwiSaver providers are geared up to take Australian superannuation savings but the same can't be said for KiwiSaver money going to Australia.

Australian superannuation providers have been bogged down in a raft of industry changes and very few have sorted their systems for transferring over KiwiSaver funds.

Australian superannuation providers have been bogged down in a raft of industry changes and very few have sorted their systems for transferring over KiwiSaver funds.

Anyway, part of the deal hammered out by government officials here and in Australia regarding transtasman portability was that superannuation savings coming from Australia to New Zealand couldn't be used for a first-home purchase.

Each country has unique features to its retirement savings schemes - the KiwiSaver first-home savings withdrawal is an example - and an agreement was made to preserve some of the access rules of the country where the superannuation savings were made.

For example, your Australian Super savings may be available to you at 60 whereas you'll be waiting until the New Zealand age of retirement - currently 65 - to get access to your KiwiSaver funds.

Those rules will apply on both sides of the Tasman.

But as Whitelock points out, the investment earnings on your Australian funds will be able to be withdrawn when you apply to use your KiwiSaver funds to boost your first-home deposit.

Some good news for first-home buyers is that from tomorrow - April 1 - member tax credits will also be able to be withdrawn to help pay for a house.

This hasn't been possible until now and means that after three years in KiwiSaver you'll be able to take out everything from your account except the $1000 kick-start payment you received when you first joined.

For those on modest incomes - $120,000 and under for a couple or $80,000 and under for an individual - tomorrow also marks the launch of the KiwiSaver HomeStart grant.

The KiwiSaver HomeStart grant replaces the KiwiSaver first-home deposit subsidy, which gave regular KiwiSavers on modest incomes an additional handout to help them get into their first home.

Under the revised scheme, HomeStart grants will provide eligible first-home buyers with a grant of up to $10,000 for individuals and up to $20,000 for couples to help with the costs of buying land on which a first home will be built or purchasing a brand new home.

Anyone eligible for the HomeStart grant who is looking to buy an existing home can receive a grant of up to $5000 for individuals and up to $10,000 for couples to put towards a house deposit.

This is on top of any money that they can withdraw from their KiwiSaver account.

More information is available from Housing New Zealand, which administer the HomeStart grant (tinyurl.com/buyinghouse).

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.

Questions

To have your KiwiSaver questions answered by the Herald's panel of industry players email Helen Twose, helen@helentwose.co.nz. Sorry, but Helen cannot answer all questions, correspond directly with readers, or give financial advice.