Buying a Home and Saving with KiwiSaver

Securing Your Future is a New Zealand government package that will help you develop a long term savings habits and save toward the purchase of your first home. This scheme is incorporated in KiwiSaver.

The KiwiSaver is a New Zealand voluntary work based long-term savings scheme which has been in operation since 2007. The main goal of the KiwiSaver fund is for retirement savings, however it also offers an opportunity for securing your first home..

KiwiSaver offers two features to help you into home ownership:

• KiwiSaver first-home deposit subsidy
• KiwiSaver first-home savings withdrawal

KiwiSaver is a work based savings plan where contributions are deducted from your pay. Your employer should be able to provide you with more  information about KiwiSaver and how it will work in this regard.

Participating employees can choose to contribute either 2%, 4% or 8% of their gross pay, and can switch rates after 3 months after setting a rate. There also may be the opportunity for you to negotiate with your employer for shorter time frame.

As a participant of the scheme you can choose where to put your savings on several "approved savings schemes" in varying degrees of expected risk and return. This can also be changed at any time but participants are only allowed one scheme at a time. Initially, when a person joins KiwiSaver, they will get a "kick start" of  $1000 tax free from the government. They also receive a "tax credit" (a payment from Inland Revenue Department - NZ) of up to $1,042.86 p.a., and potentially a first home deposit subsidy.

KiwiSaver contributions can only be accessed in the following circumstances:

• You reach retirement age or you have been a KiwiSaver member for five years (whichever is the latter)
• A one-off withdrawal after three years to help in the purchase of the first home
• Serious illness
• Significant financial hardship
• If the person has been out of New Zealand for 12 months.

Making Mortgage Repayments
The good thing for KiwiSaver is that it can be used as Mortgage diversion. Some of the employee contributions can be used to make mortgage repayments instead of going towards KiwiSaver (only after a person has been signed for 12 months). This is only permitted  for repayments on the main home, and not for other properties such as investment or holiday homes. Employer contributions will not be able to be used for the mortgage.

The KiwiSaver benefits are summarized as follows:

$1,000 kick Start - All new KiwiSaver members qualify for the kick-start payment when they first join. It is paid into your account approximately 3 months after Inland Revenue receives your first contribution or notification of your membership.  It will only be deposited into your account and will not be made available as a cash payment. You only qualify once and if you cease being a KiwiSaver member you won't be permitted to receive another payment, even if you return to New Zealand at a later date and start another KiwiSaver account. e.g. (after living overseas for a period of time)

Contributions from your employer – Your employer will make compulsory contributions to your KiwiSaver savings if you are eligible.  These payments will be taken from your wages and equal to 2% of your pay.

Member tax credits - The Government will match your contributions by up to $1, 042.86 each year and is paid annually.  This approximates to about $20 week and is designed to encourage you to save.  To get the full member tax credit, you have to have at least contributed $1,042.86 a year yourself, exclusive of the employer and government contributions. If you don’t meet the said amount, you can make voluntary contributions to ensure you receive the full member tax credit payment of the government.

Savings withdrawal to buy your first home - You may be able to withdraw some or all of your KiwiSaver savings (except for the $1,000 kick-start and member tax credit) to put towards buying your first home. To make a first withdrawal, you must have been a KiwiSaver member or a member of a complying fund for three or more years. You can only buy your first home and not an investment property.

http://www.hnzc.govt.nz/hnzc/web/rent-buy-or-own/buying-your-first-home-with-kiwisaver/buying-your-first-home-with-kiwisaver_home.htm

First home deposit subsidy – A member is entitled for a first home deposit subsidy after 3 years of contribution. This subsidy will be paid to your solicitor on the day the purchase of the property is settled. $,1000 for each year up to maximum of $5,000 for five years. If you are a couple and both qualify for such, you can receive a combined subsidy up to $10,000.

http://www.kiwisaver.govt.nz/new/benefits/home-sub/

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