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By Donna Nicolof, BNZ
Saving for a first home can be hard. According to the latest Reserve Bank figures, house prices – especially in Auckland and Christchurch – are rising faster than wages.
So for many, it may feel like the finish line never gets any closer. But all is not lost.
If you’re a member of a KiwiSaver scheme you may qualify for two great incentives that make it easier to get onto the property ladder. They are the KiwiSaver first-home withdrawal and the KiwiSaver HomeStart grant. What’s more, the Government has recently announced changes to both of these, making them somewhat more generous.
A KiwiSaver first-home withdrawal lets you withdraw some or all of the savings you have in a KiwiSaver scheme, to help with the purchase of your first home, while the KiwiSaver HomeStart grant is a grant from the Government that could boost the amount of money you have available to purchase an existing or new property.
Do you qualify for these incentives?
To qualify for a KiwiSaver first-home withdrawal you need to have been a member of a KiwiSaver scheme for at least three years. For the KiwiSaver HomeStart grant, the key difference is that you also need to have been contributing to a KiwiSaver scheme for three years or more. There are some other criteria, which you’ll find at the end of this article.
Importantly, the property purchase needs to be your first home and it must be for you to live in. So if you intend to rent the house out, then unfortunately the KiwiSaver incentives aren’t for you.
KiwiSaver first-home withdrawal
Thanks to the recent changes, which took effect on 1 April 2015, you’re now able to withdraw more than you could previously. Previously, first-home buyers were only able to withdraw their own contributions, any employer contributions and any investment gains. Under the new rules you’re now also able to withdraw any Government Member Tax Credit contributions you’ve received. So essentially, you can withdraw everything in your KiwiSaver account except for the $1,000 kick-start. You’re also unable to withdraw any Australian super transfers, which must remain in your KiwiSaver account.
KiwiSaver HomeStart grant
The KiwiSaver HomeStart grant replaces what used to be the KiwiSaver first-home deposit subsidy. Like its predecessor, if you’re purchasing an existing home, the KiwiSaver HomeStart grant might give you $1,000 for each year you’ve contributed to a KiwiSaver scheme, up to a maximum of $5,000.
However, under the new rules, the KiwiSaver HomeStart grant has upped the level of support if you’re purchasing a brand-new home, a home off the plans or land on which to build a new home. In these cases the KiwiSaver HomeStart grant doubles to $2,000 for each year you’ve contributed to a KiwiSaver scheme, taking the maximum amount to $10,000.
Because the Government’s aim is to help first-home buyers into home ownership, it figures you won’t be buying million-dollar houses! So the eligibility for the KiwiSaver HomeStart grant is also subject to household income and regional house-price caps, which vary depending on where you are in the country. These and the other eligibility criteria are set out below.
Two very distinct incentives
There’s a misconception that you won’t qualify for a KiwiSaver first-home withdrawal if you don’t meet the household income and regional price caps. So you need to realise that these are two very distinct incentives. You can qualify for a KiwiSaver first-home withdrawal as long as you meet the criteria of having been a member of a KiwiSaver Scheme for at least three years – regardless of whether or not you qualify for the KiwiSaver HomeStart grant. The household income and regional prices caps only kick in if you’re applying for the grant.
Leave it too late and you may miss out
When it comes to a KiwiSaver first-home withdrawal, you need to talk to your KiwiSaver scheme provider, as they’ll handle the application process and the release of your funds. The KiwiSaver HomeStart grant, on the other hand, is run by Housing New Zealand, so you need to get in touch with them to begin the application process. Visit www.hnzc.co.nz to find out how.
The thing you really need to remember is that both will take time to assess and process. So the sooner you start thinking and planning, the more likely you’ll be able to access these incentives on settlement day.
Join forces! If you’re a couple or friends, and are planning on buying a house together, you can combine any KiwiSaver first-home withdrawals and any KiwiSaver HomeStart grants that you individually qualify for.
Want a second chance? If you’ve previously owned a home you may still qualify for both incentives – as long as you can prove you’re in the same financial position as a first-home buyer.
KiwiSaver HomeStart grant
Additional qualifying criteria and household-income caps
• You must be aged 18 or older.
• You must meet the KiwiSaver membership and contribution requirements.
• You must have an annual household income of $80,000 or less (before tax) for one person, or $120,000 or less (before tax) for two or more people.
• You need a deposit of at least 10% — which a home-purchase withdrawal from a KiwiSaver account and the KiwiSaver HomeStart grant can count towards — and plan to live in the house for at least six months.
Regional house-price caps: the threshold at which the property purchase qualifies for a HomeStart grant
• In Auckland the maximum purchase price is $550,000.
• In Hamilton City, Tauranga City, Western Bay of Plenty, Kapiti Coast, Porirua City, Upper Hutt, Hutt City, Wellington City, Nelson City, Tasman, Waimakariri, Christchurch City, Selwyn District and Queenstown Lakes the maximum purchase price is $450,000.
• For everywhere else in the country, the maximum purchase price is $350,000.
Government Member Tax Credit: To help you save, the Government makes an annual contribution towards your KiwiSaver account, as long as you are a contributing member aged 18 or over. The Government will pay 50 cents for every dollar of member contribution annually, up to a maximum of $521.43.
Household Income: a measure of the combined incomes of all people sharing a place of residence.
Regional house-price caps: the threshold at which the property purchase qualifies for a HomeStart grant.