KiwiSaver and your First Home Purchase

Purchasing your first home is an exciting milestone, and for many Kiwis, KiwiSaver is a valuable tool that can help make first home ownership a reality. If you’re planning to use your KiwiSaver savings to help purchase your first home, here’s what you need to know, including when KiwiSaver clawback fees may apply.

KiwiSaver allows eligible members to withdraw their savings to put towards buying their first home. You can withdraw almost all of your savings, including your contributions, your employer’s contributions, and any investment returns—leaving a minimum balance of $1,000 in your KiwiSaver account.

Eligibility criteria

To withdraw your KiwiSaver funds for a first home purchase, you must:

• Have been a KiwiSaver member for at least three years.
• Intend to live in the property (it cannot be an investment property).
• Not have owned property before (some exceptions apply for previous homeowners under the ‘second-chance’ scheme).
• Be purchasing a property or land in New Zealand.

How can I apply to use your KiwiSaver

1. Contact your KiwiSaver provider to check your eligibility and obtain the necessary forms.
2. Get confirmation from your lawyer that the funds will be used for a first home purchase.
3. Submit your application well in advance, as processing times can vary.
4. Funds will generally be paid directly to your lawyer before settlement.

When do KiwiSaver Clawback Fees apply?

A KiwiSaver clawback can occur if you receive government contributions or make withdrawals you were later deemed ineligible for. Here are some of the main reasons how a clawback fee may apply:

1. Government Contributions Clawback

• If you mistakenly received government contributions (e.g., you were ineligible or withdrew funds incorrectly), Inland Revenue (IRD) may require you to repay them.

2. KiwiSaver First Home Withdrawal Issues

• You can still withdraw KiwiSaver funds to buy your first home, but there are rules:
  • You must intend to live in the home.
  • You cannot have previously owned a home, unless you qualify under the second-chance scheme.
• If it turns out you didn’t meet the criteria, you could be required to repay the withdrawn funds.

3. Hardship or Health Withdrawals

• If you withdraw funds due to significant financial hardship or serious illness, but your circumstances change or the withdrawal was made based on incorrect information, you may be asked to return the funds.
• This typically happens if the withdrawal was fraudulent or incorrectly approved

Moving overseas during your KiwiSaver contribution period can also lead to a clawback fee. A recent case of this occurred with a New Zealand first-home buyer, Sarah, who experienced an unexpected reduction of $800 in her KiwiSaver funds due to a clawback of government contributions for periods when she was overseas.

In Sarah’s case, the clawback was applied because she had been out of New Zealand during certain periods, making her ineligible for government contributions during those times. When she applied to withdraw her KiwiSaver funds for a first home purchase, her provider identified these periods of ineligibility and deducted the corresponding amount.

This underscores the importance of informing your KiwiSaver provider about any extended periods spent overseas, as government contributions are generally only available to members residing in New Zealand. Failing to do so can result in unexpected clawbacks when accessing your funds.

For more detailed information on KiwiSaver rules and obligations, you can visit the Inland Revenue.

Using your KiwiSaver for your first home purchase can be a game-changer.

Yes, it can but it’s essential to understand the process and any obligations that come with it. Make sure you plan ahead, check your eligibility, and consider seeking professional advice to ensure a smooth home-buying experience.

If you’re considering withdrawing your KiwiSaver savings, talk to your provider or a Financial Adviser to get the latest information on eligibility and requirements. With the right preparation, you’ll be well on your way to securing your first home in no time. Sweet.