The KiwiSaver provider would pay the funds to a New Zealand-based solicitor who would in turn transfer the money to an Australian solicitor at settlement.
If the sale fell through the Australian solicitor would see the money was returned to the KiwiSaver provider.
Thomas says not all KiwiSaver providers were on board with this, with some saying it was not in the spirit of the KiwiSaver legislation.
"All we did in that case was transfer out of [that provider] into [another provider] and just flicked it over."
A Cabinet paper tabled late last year by the Minister of Commerce and Consumer Affairs, Paul Goldsmith, says of 10 providers surveyed on their stance to withdrawals for first homes from overseas-based KiwiSavers, three said they would approve the applications, four said they would decline them and one said it would decline requests from Australia but would approve those coming from other countries.
The other two providers were not clear what their policy was.
At that time the rules were "silent on where a home is located, resulting in confusion [and] inconsistent decisions", says Goldsmith.
He went on to say it was a good time to tidy up the rules because the first home withdrawal option was becoming more popular - the number of people taking money out for first homes jumped 30 per cent to 13,821 between the years ending June 2013 and June 2014, with total funds withdrawn going up 40 per cent to $168.7 million over the period.
On April 1, the KiwiSaver Act was tweaked so that schedule 1, clause 8(3), which previously read "for the purchase of an estate in land" now says "for the purchase of an estate in land located in New Zealand".
"I expect that a decision to prevent the first home withdrawal being used for a home overseas will be controversial, with public opinion on this issue divided," says Goldsmith in the Cabinet paper.
In Australia, Mark Thomas says the "tap has been turned off" with at least one couple caught up in the changes.
"We've had properties which we were a week out from settlement and we were expecting the money to be sent over and it's been refused.
"The clients were really lucky in this case that they had extra funds."
So how can you take your KiwiSaver funds to Australia?
A couple of years ago the legislative path was smoothed for KiwiSaver funds to be transferred to an approved Australian fund, but the reality is the transfer is voluntary and at this stage only Perth-based WA Super is taking KiwiSaver funds.
If anyone has had any success with other Australian superannuation providers, let me know.
Once in Australia, KiwiSaver money cannot be used to purchase a first home.
When the new transtasman transfer rule came into effect in 2013 it replaced the option to cash up your KiwiSaver contributions when you move permanently to Australia.
Disclaimer: Information provided is stated accurately to the best of the respondent's knowledge at the time of publication. It is general in nature and should not be construed, or relied on, as a recommendation to invest in a particular financial product or class of financial product. Readers should seek independent financial advice specific to their situation before making an investment decision.
Questions
To have your KiwiSaver questions answered by the NZ Herald's panel of industry players, email Helen Twose, helentwose@gmail.com. Sorry, but Helen cannot answer all questions, correspond directly with readers, or give financial advice.