Business or home, it's still a property

Generally anyone over 18 who has been in KiwiSaver for three or more years and is buying a first home can apply to their KiwiSaver provider to withdraw everything. Photo / Getty Images

Q: I am buying a small industrial property in a provincial town for my daughter for her 21st birthday, taking out a loan to do so. She will owe me that sum plus interest, but she gets the net return (it will help pay her student loan). Does owning an industrial property preclude her from being entitled to a first-home grant to buy her first home when she, too, uses her KiwiSaver? She has put in the full amount since turning 18. I'll clear up a bit of confusion about the KiwiSaver first-home withdrawal first.

A: Generally anyone over the age of 18 who has been in KiwiSaver for three or more years and is buying a first home, not an investment property, can apply to their KiwiSaver provider to withdraw everything in their KiwiSaver account, except the last $1000.

To do this you need to get in touch with your provider when you begin house-hunting.

On settlement, the money will be transferred to your solicitor for payment to the seller.

It can't be done after settlement or paid directly to you, so you need to be on top of the paperwork in advance of settlement day.

If you meet the criteria you could also be eligible for a Government top-up - the HomeStart grant - aimed at getting those on modest incomes into their first home.

There are strings attached to the HomeStart grant, the main ones being that you must plan to live in this first home for at least six months, your income for the past year needs to have been $80,000 or under ($120,000 for a couple), you will have made regular contributions to KiwiSaver for at least three years and the house can't exceed the house price cap.

The HomeStart grant, worth between $5000 and $20,000 depending on your circumstances, is run by Housing New Zealand.

It is a separate payment to the standard KiwiSaver funds withdrawal.

I asked Emma Dale, a KiwiSaver specialist at law firm Chapman Tripp, about whether your daughter would be eligible for a first-home withdrawal or HomeStart grant after you've bought the industrial property in her name.

Dale says there is no distinction in the first-home withdrawal criteria between owning an industrial or residential property.

"If the mother buys the industrial property in the daughter's name, the daughter will hold an estate in land directly.

"That would preclude the daughter using her KiwiSaver funds to buy a first home down the track, unless one of the exceptions apply. In the situation that the mother describes, it would appear that none of the exceptions apply.

"However, it may be possible to structure the arrangements as a trust to preserve the first-home withdrawal opportunity.

"A trust exception would apply if the daughter was a trustee and the beneficiary (the daughter) has no expectation of being entitled to occupy the land as a principal place of residence," says Dale.