First-home subsidy is for a house you'll live in and not for a purchase aimed at making money.

I'm encouraging my two children to buy their first (joint) house by combining their savings. I understand if they don't live in it (ie it is an investment or rental) they cannot withdraw their five years of KiwiSaver contributions (around $5000), nor get the $5000 government contribution.

However, further down the track when they come to buy their own house to live in, it seems because they have already owned a house, they are no longer eligible for the $5000 contribution. Any good ideas here?
An extra $20,000 now would be useful to increase the deposit. I wanted to avoid a trust or a look-through company due to the added cost and complexity. They can't afford to live in this house as they need the rent to pay the mortgage.

Firstly, to qualify for the first-home deposit subsidy you must have contributed at least 2 per cent of your income to a KiwiSaver scheme, or a complying superannuation scheme, for at least three years; be buying your first home (although there are some exceptions) and be planning to live in the house for at least six months.

Income and house-price caps will apply: the income cap for two people is less than $100,000 combined and the house price cap is $400,000 for houses in Auckland City, Wellington City, Selwyn District or Queenstown Lakes District and $300,000 everywhere else.

It appears possible for them to have bought a previous property and apply for the deposit subsidy later, but Housing New Zealand has certain criteria it applies to previous home owners.

The current rules on this state that for a previous home owner their total "realisable assets" including cash and investments (ie net equity in property) when applying for the subsidy must be no more than 20 per cent of the cap.


For example, a previous home owner applying for the subsidy in Auckland must have no more than 20 per cent of $400,000 (ie $80,000) in net assets.

A Housing New Zealand spokesperson has provided this clarification:

"If you currently hold an estate in land, you won't be eligible for a KiwiSaver first-home deposit subsidy or KiwiSaver first-home withdrawal.

"These products are designed to help people purchase their first home, so if you already own a property you won't meet the criteria. This includes a property that you own but don't live in because you are renting it out.

"However, if you have owned a property in the past, but no longer own that property (regardless of whether you lived in the property or rented it out), you can apply for the first-home subsidy and savings withdrawal as a previous home owner.

"To be eligible you need to meet the additional criteria of the realisable assets test - which include your realisable assets being no more than 20 per cent of the house price cap for the area you are buying in.

"For example, if you were buying a house in the $300,000 cap area, your realisable assets cannot be worth more than $60,000."

It would be feasible to contemplate a structure that has the effect of getting your two children on to the property ladder and protect the subsidy for their home purchase but that is beyond the scope of this column.

*Peter Christensen, Camelot Group chairman
Q: Under what "hardship" circumstances can you dip into your KiwiSaver funds?
My workplace is undergoing a restructure and I'm not certain I'll still have a job at the end of it.

Significant financial hardship is defined in legislation as significant financial difficulties that arise because of:

a. A member's inability to meet minimum living expenses; or

b. A member's inability to meet mortgage repayments on his or her principal family residence resulting in the mortgagee seeking to enforce the mortgage on the residence; or

c. The cost of modifying a residence to meet special needs arising from a disability of a member or member's dependent; or

d. The cost of medical treatment for an illness or injury of a member or a member's dependent; or

e. The cost of palliative care for a member or a member's dependent; or

f. The cost of a funeral for a member's dependent or

g. The member suffering from a serious illness.

The amount of that significant financial hardship withdrawal may, subject to trustees' approval, be up to the value of the member's accumulation less the amount of the crown contribution on the date of withdrawal.

The trustees:

a. Must be reasonably satisfied that reasonable alternative sources of funding have been explored and have been exhausted; and

b. May direct that the amount withdrawn be limited to a specified amount that, in the trustees' opinion, is required to alleviate the particular hardship.

If the restructure results in you being made redundant and leads to any of the above circumstances then you may be in a position to withdraw funds subject to trustees' approval.

It would definitely pay to discuss your situation with your KiwiSaver provider.

*Carmel Fisher, Fisher Funds managing director
Q: I have been in KiwiSaver for five years now. Am I entitled to withdraw my KiwiSaver funds? I'm not yet 65.

Sorry, not yet; KiwiSaver funds can't be withdrawn until you qualify for New Zealand Superannuation (which is currently 65) or you have completed five years of membership, whichever is later.

In limited circumstances early withdrawals may be made in cases of financial hardship, serious illness, permanent emigration or to help you purchase your first home.

*Nigel Jackson, Westpac acting head of investments and insurance
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,