KiwiSaver: Earning too much? No grant for you

Single people must earn less than $80k, and couples or groups less than $120k, for a HomeStart grant. Photo / Janna Dixon

Q: Does the earning cap of $80,000 apply for a single person who wants to withdraw their KiwiSaver home deposit, but not worry about the subsidy?

A: In some respects KiwiSaver is pretty straightforward, but there is confusion around options for first-home buyers.

Joe Bishop, head of retail and marketing at Gareth Morgan Investments, says there are two benefits for KiwiSaver members wanting to buy their first home.

"One is the first-home withdrawal and the other is the HomeStart grant, which replaced the first-home deposit subsidy on April 1 and is overseen by Housing New Zealand.

"The first-home withdrawal option allows members who have been in KiwiSaver for three or more years and who qualify for withdrawal to take out their contributions, their employer contributions, their member tax credits and any income earned on the investment.

"You must leave a minimum balance of $1000 in your account as well as any money transferred from an Australian superannuation scheme. There are a number of other conditions that you must meet to be eligible.

"KiwiSaver members may also qualify for the HomeStart grant, overseen by Housing New Zealand.

"You must have been contributing at least 3 per cent of your total income to KiwiSaver for a minimum of three years.

"If you are buying a pre-existing house, the grant can provide you with $1000 for every year you have been in KiwiSaver, up to $5000.

"If you are buying a newly built home, or a home off plans, the grant is $2000 for each year of contribution, up to $10,000.

"You must meet certain requirements to receive this grant, and that includes earning less than $80,000 a year, before tax, if you are a single buyer, or less than $120,000 in total if there are two or more of you buying."

Earning caps only apply to the grant.

"With the first-home withdrawal, as long as you meet the required criteria, there is no cap on what you can withdraw.

As with the first-home withdrawal, you must leave a minimum balance of $1000 in your account, and you can't withdraw any money transferred from an Australian superannuation scheme.

So you need to contact your provider to ensure your paperwork is in order if you want to use funds towards your first home.

If you qualify for the additional boost from the HomeStart grant you also need to contact Housing New Zealand.