KiwiSaver: Doors shut on NZ-grown funds for Aussie home

Melbourne, Australia.

I would like to use my KiwiSaver to help me buy my first home in Australia - I have never owned a house here or in NZ.
I lived in New Zealand for nearly seven years and moved to Sydney one-and-a-half years ago.
I am an IT professional and had been contributing to KiwiSaver since 2008.
I am not sure what the steps are to bring out KiwiSaver to Australia.
Alternatively I believe I could withdraw my KiwiSaver, given I moved permanently to Australia?
I don't think superannuation in Australia can be used to buy a home here so I can't just transfer KiwiSaver across the Tasman and use it as a deposit.

Up until a couple of months ago it was possible to use KiwiSaver to buy a first home in Australia but all that changed at the beginning of April.

The Taxation (KiwiSaver HomeStart and Remedial Matters) Act 2015 boosted KiwiSaver first home benefits by allowing member tax credits to also be used towards a first home and increasing the grant available to those on modest incomes looking to buy a newly built first home, but it also shut the door on the ability to use KiwiSaver funds to buy a house in Australia.

Perth-based Kiwi and financial adviser Mark Thomas of Silver Fern Finance says he was helping around one person a month take KiwiSaver money to Australia to buy a home.

Clients he helped would need an unconditional sale and purchase agreement with the bank agreeing to finance on the basis that some of the funds would be coming from a KiwiSaver account in New Zealand.

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.