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                                                    Check rules before house hunting

Q.        I have been in KiwiSaver for more than 3 years and I have been saving hard towards my First Home.  However, we have a Family Trust which owns a rental property bought some years ago.  Am I still eligible to make a First Home Withdrawal?

 A.      Anyone thinking of buying a house using KiwiSaver should talk to their fund manager early on in the process, to avoid making assumptions about whether or not they can use their KiwiSaver savings. When KiwiSaver was set up, the Government decided that buying a First Home was an important step towards gaining financial security. Since 1 April 2015 eligible members can apply to withdraw everything except the Government kick-start from their KiwiSaver – a significant sum of money in many cases. 
The KiwiSaver Act sets out who is eligible to make a withdrawal. It is aimed at people who have not owned a home before, or in the case of the Second Chance, are in a similar situation to First Home buyers with lower income and assets.  

A typical First Home withdrawal application asks investors to declare that they have “either not held an estate in land before, or any previous estate was or is held on the basis described in Rule 8(5) of the KiwiSaver Scheme Rules...” 

What is Rule 8(5) of the KiwiSaver Scheme Rules? This Rule sets out exemptions from previous ownership of property. This includes a person who holds the estate in land as a bare trustee; who owns the estate in land as a leasehold estate or an interest in Maori land; or a person who holds the estate as a trustee who “is a discretionary, contingent or vested beneficiary under the relevant trust; but…has no reasonable expectation of being entitled to occupy the land as the principal place of residence for the person or the person’s family until the death of the person who currently occupies the land…or the death of the occupier’s survivor.”

I suspect that you would be entitled to occupy the land that your trust owns, in which case you would not be regarded as a First Home buyer. 
Should the trust decide to sell the property, you could apply as a Second Chance through Housing New Zealand provided you have limited realisable assets (no more than $70,000) and your income is less than $80,000 or $120,000 for a couple.  Any house bought in Hawkes Bay under these rules has to be $350k or less.
It will be disappointing to you that you have been diligently saving into your KiwiSaver for three years – perhaps at a higher rate than 3% - only to find that you may not be able to access these funds to buy a home. 

Another situation where people are disappointed are those they buy a section and then apply to withdraw their KiwiSaver savings to build a house. They are deemed to already own property (namely the section) and are no longer eligible to make a First Home withdrawal. They can apply under the Second Chance through Housing New Zealand, but this has stricter criteria than the First Home withdrawal.

Readers should find out the rules early on in their planning, and if they don’t qualify they should save into a more accessible fund than KiwiSaver. 

As published in the Hawkes Bay Today 24 August 2015
Shelley Hanna is an Authorised Financial Adviser FSP12241. Her disclosure statement is available on request and free of charge by calling 06-8703838 or go to www.peak.net.nz. The information contained in this article is of a general nature and is not personalised. Send your KiwiSaver questions to 
shelley.hanna@peak.net.nz