Kiwisaver: Scholarships don't count as income

It can be worth paying into KiwiSaver even if as a student you don't have earnings. Photo / Getty Images

Q: My partner recently joined KiwiSaver. She is completing her PhD and is fully funded by scholarships. We are unsure how much we need to contribute to KiwiSaver from these scholarships for her to qualify for the first-home grant in a few years. The scholarships are not classed as income and cover the expenses of her studies, such as lab analysis, as well as living expenses.

My second question regards my KiwiSaver. I took a contribution holiday about four years ago. I have been back in New Zealand for more than two years and contributing to KiwiSaver but the KiwiSaver website states I am still on a contribution holiday. Will this affect my eligibility for a first-home grant when we apply?

A: When you want to withdraw KiwiSaver money to buy a first home you need to talk to your KiwiSaver provider.

If you want the HomeStart grant, worth up to $20,000 for a couple, contact Housing New Zealand.

The HomeStart grant, for those on modest incomes buying a modestly priced house, is paid alongside any KiwiSaver fund withdrawals to buy your first home.

The HomeStart grant needs you to make consistent contributions to your KiwiSaver account for at least three years.

There is also a minimum level of contribution, which has changed since KiwiSaver was introduced but since April 2013 has sat at 3 per cent of your income, 3 per cent of the minimum wage for non-earners or 3 per cent of your yearly benefit for beneficiaries.

I asked Housing New Zealand how it would treat your partner's scholarship when it came to assessing eligibility for the HomeStart grant.

"Given that a scholarship is not deemed to be income and on the basis this was the only source of funds, we would encourage the member to make voluntary contributions based on the adult minimum wage over a 40-hour week," says HNZ.

"The adult minimum wage has increased to $15.25 an hour so this would equate to monthly contributions of about $80, or an annual lump-sum payment of $951.

"Of course, to get full benefit of the Government's member tax credits, members should contribute the minimum of $1042 a year."

HNZ says contributions to KiwiSaver can still be made on an official contributions holiday.

"Therefore, providing we can see evidence of the contributions made while still on a contributions holiday, the fact IRD still has the member registered as being on a holiday should not have any impact on the eligibility for the grant. We count all contributions made, even if they are made during an official IRD contributions holiday."

More details on the HomeStart grant, including the full eligibility criteria, is on the HNZ website: hnzc.co.nz/buying-a-house