Q: My stepson and his wife saved for a deposit on a home and decided to purchase a section on which to build it. Because the section was less than the deposit he had saved he used it to buy the section, intending to get a mortgage and use his KiwiSaver funds for the house build. He has been paying in since KiwiSaver started. We were dismayed to find the KiwiSaver funds couldn't be withdrawn because he did not meet the first-home buyer rule. Because he had purchased a section, he was no longer a first-home buyer (despite a section not being a home). He fought long and hard, with help from his accountant father and the local MP, to no avail. I wonder how many other young people could be caught like this?
A: I can't tell you how many people might have been caught out in a similar manner but I did seek clarification from Michael Raynes, head of marketing and communications at Fisher Funds.
"It is a shame that your good savings habits and good intentions worked against you but under KiwiSaver legislation owning land is treated the same as owning a house — you are considered to have purchased an Estate in Land," says Raynes. "Unfortunately, you are not eligible to make a withdrawal from your KiwiSaver account to help build your first home.
"As with many things the devil is in the detail. We would encourage anyone thinking about using their KiwiSaver savings to buy their first home to contact their KiwiSaver provider as early as possible to ensure they have a full understanding of whether they are eligible, how much they can potentially withdraw and what the process they need to go through is," he says.
The legal version of Raynes' explanation is that the KiwiSaver Act states people can make a first home withdrawal so long as "the member has not, at any time before applying to make a withdrawal under this clause (whether before or after becoming a member of the KiwiSaver scheme) held an estate in land (whether alone or as a joint tenant or tenant in common)".
