Income cap stymies second-chancer

Those wanting to buy a second 'first home' have to meet an income cap requirement. Photo / Doug Sherring

Q: I am trying to buy a house in Auckland, but struggling to access my KiwiSaver funds. I bought my first house in 2010 with my then wife. I hadn't been a KiwiSaver member long enough to use it then. No money was made from selling the house in 2011. My KiwiSaver provider says my second-chance withdrawal is assessed on a case-by-case basis by Housing New Zealand, but when I applied I was told I am not eligible as I am over the $80,000 salary cap. How is this deemed the income of an average first-home buyer? With prices the way they are, the salary cap of $80,000 is stretching the mortgage pretty far. It seems daft that HNZ deems a first-home buyer's income the same as someone who is eligible for the HomeStart grant. Does every first-home buyer get the grant? I would like to challenge the HNZ assessment. I am in no better financial position than a person who "has never held an estate in land".

A: For first-home buyers who have never owned property there is no income cap on KiwiSaver withdrawals and never has been.

The income cap only applies to those wanting HomeStart grants or who are planning to buy a home again using KiwiSaver.

It is possible a previous owner buying again could be eligible for the HomeStart grant on top of the KiwiSaver withdrawal.

The HomeStart grant comes with extra conditions, such as regional house-price caps. HNZ's role is to determine if you are indeed in the same financial position as a first-home buyer and the KiwiSaver provider handles the application.

The rules for withdrawal are prescribed by the KiwiSaver Act, and the Government sets specific criteria for previous homeowners, including the salary caps - $80,000 for singles and $120,000 for several people - and having realisable assets such as shares, term deposits, classic cars or similar worth no more than 20 per cent of set regional house-price caps.

HNZ assesses all applications consistently against the same criteria and it has no discretion to waive any in individual cases.

"If your income exceeds $80,000 and you are a previous home-owner, you are not eligible and HNZ cannot overrule this," it says.

"There is no appeal process, as this is covered by legislation and Cabinet directive."

I asked the Ministry of Business, Innovation and Employment (MBIE), which oversees KiwiSaver policy, whether the income caps are likely to be reviewed.

It says for previous homeowners wanting to make a KiwiSaver withdrawal, the income cap has changed in the past 10 years.

"When introduced it was $100,000 for one or two buyers and $140,000 for three or more buyers.

"It was changed on 1 October 2013 to $80,000 for a single buyer, and $120,000 for two or more buyers," says MBIE.

When the HomeStart grant was introduced in April last year, the house price caps and grants were increased to support buying new homes, it says.

"The income cap was also reviewed at this time, but was not changed," MBIE says.

"The Government monitors market conditions and may decide to change the income caps from time to time."