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Kiwisaver withdrawal for home purchase

In New Zealand, the KiwiSaver Act 2006 and associated regulations allow and govern withdrawals from KiwiSaver accounts for the purpose of purchasing a home which is a great benefit for first home buyers and the like.  These withdrawals are possible, provided specific conditions are met. These include:

  1. You must not have previously made a withdrawal for a home purchase.
  2. You must have been in a KiwiSaver scheme or a complying superannuation fund for a combined total period of at least three years.
  3. The intended purchase must be for an estate in land located in New Zealand and you must intend to live in the property as your principal place of residence. Both freehold and leasehold estates are eligible.
  4. If you are a previous home owner, you may still be eligible to make a withdrawal; however, Kāinga Ora will firstly need to determine whether you are a qualifying person which assesses if you are in the same financial position as a first home buyer. If you are approved then Kāinga Ora will provide a letter that will need to be included in your application to withdraw your KiwiSaver contributions.

You can withdraw your accumulated contributions, any employer contributions made on your behalf, and investment returns, but cannot withdraw the government’s initial $1,000 “kick-start” contribution or any amount transferred from an Australian complying superannuation scheme.
Before a withdrawal is processed, several obligations must be fulfilled:

  1. Funds withdrawn for a home purchase must be paid directly to the purchaser’s solicitors.
  2. KiwiSaver providers require purchaser’s solicitors to provide the following as part of the withdrawal application:
    • A copy of the sale and purchase agreement.
    • Evidence of the member’s right to occupy Māori land if the withdrawal pertains to the purchase of an interest in a dwelling-house on Māori land.
    • Undertakings related to the conditional or unconditional state of the agreement, including the obligation to repay withdrawn funds to the KiwiSaver provider if the settlement does not proceed.

One of the big considerations when entering into a purchase agreement is how your KiwiSaver withdrawal will be used, as the agreement may need to be changed to accommodate this.

For example, if the KiwiSaver withdrawal funds are to be used towards the deposit (generally 10% of the purchase price) then it is in the purchaser’s best interests to ensure this is discussed this with their legal advisor.

  1. Firstly, so that the agreement can be added to before signing to include a KiwiSaver requirements stating that the:
    • Deposit (which includes the KiwiSaver withdrawal) will be paid to the vendor’s solicitor’s trust account (not the real estate agent if there is one selling the property) when it falls due for payment;
    • vendor’s solicitor will hold until settlement occurs; and
    • if settlement does not occur (if the vendor defaults) those funds are repaid to the purchaser’s solicitors who in turn has to repay those funds to your KiwiSaver provider.
    • Undertakings are required to be given by the vendor’s solicitors for the above due to the undertakings purchaser’s solicitors have to provide your KiwiSaver provider.
  2. Secondly, to assist you with applying for your KiwiSaver withdrawal during your finance condition period. KiwiSaver providers can take up to 10 to 15 working days to process a first-home withdrawal and send funds to your solicitor’s trust account so it is wise to discuss this further with your legal advisor from the start.

If the KiwiSaver withdrawal is to be used for the deposit this can sometimes pose challenges for vendors who are relying on those funds for an on-purchase, as they won’t actually be available for the vendor to use until settlement date.  This can be discussed during preparation of the purchase agreement, and before signing.

The withdrawal can instead be applied for after your purchase agreement has become unconditional (when all conditions have been confirmed) and therefore not used for the deposit, however if you do have any possible issues with the withdrawal and do not end up obtaining these funds it can pose a risk for purchaser’s if they don’t have sufficient funds to settle.  This is where it is highly recommended to discuss the process and options with your legal advisor before entering into a purchase agreement.

Next Steps:

  1. Review your eligibility for a first home withdrawal.
  2. Coordinate with us to structure your purchase agreement according to KiwiSaver requirements.
  3. Initiate the KiwiSaver withdrawal process as early as possible, allowing sufficient time for processing before settlement.
  4. Have contingency plans in case anticipated funds are not obtained.

We are here to help make this process as smooth and stress free as possible for you.

For more information contact Amanda Lowe or Jenna French

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