Are you going on maternity leave but intend on buying a first home soon?
When you go on maternity leave and are thinking about buying your first house in the next few years you should consider making voluntary contributions to KiwiSaver or risk missing out on the HomeStart grants.
The KiwiSaver HomeStart grant provides eligible first-home buyers:
- For purchasing an existing home, the grant is between $3,000 and $5,000 based on $1,000 each year of KiwiSaver membership.
- For building or purchasing a new home, or for purchasing land to build a new home on, the grant is, in effect doubled to, $2,000 per year of membership in the scheme, up to a maximum of $10,000 for five years for each member.
In addition, the KiwiSaver HomeStart grant also provides eligible first-home buyers with a grant of up to $10,000 for individuals and up to $20,000 where there are two or more eligible buyers, to help with the costs of purchasing a brand new home.
The KiwiSaver first-home withdrawal means eligible members can withdraw their KiwiSaver contributions (including tax credits). However at least $1,000 must remain in their KiwiSaver account.
Now the sting in the tail comes when you are on maternity leave or not earning for any period and you cease contributions for that time. To be eligible for the HomeStart grant you must have contributed at least the minimum percentage of your total income to a KiwiSaver scheme, complying fund or exempt employer scheme for a period of at least three years.
If you are a non-earner you must contribute at least the minimum percentage of the minimum adult wage based on a 40 hour week to a KiwiSaver scheme, complying fund or exempt employer scheme for a period of at least three years. (From 1 July 2007 to 31 March 2009 the minimum contribution was 4 percent of the minimum wage. From 1 April 2009 to 31 March 2013, the minimum contribution was reduced to 2 percent of the minimum wage. From 1 April 2013 the minimum contribution was increased to 3 percent of the minimum wage).
If you are a beneficiary, you must contribute at least the minimum percent of your yearly benefit (before tax). (From 1 July 2007 to 31 March 2009 to 31 March 2013 the minimum contribution was 4 percent of your yearly benefit. From 1 April 2009 to 31 March 2013, the minimum contribution was reduced to 2 percent of your yearly benefit. From 1 April 2013 the minimum contribution was increased to 3 percent of your yearly benefit).
If no voluntary contributions are made during periods of non income/benefit, then that period will not count towards eligibility for the HomeStart grant.
So if you are heading into a non-earner period (e.g. maternity leave) or onto a benefit then consider getting specific advice as to how much you should pay as voluntary contributions to KiwiSaver to remain eligible for the HomeStart grant.
Another thing you need to be aware of is the HomeStart grant requires the recipients to live in the property for 6 months or they have to repay the grant. Kiwisaver can also ask for the funds to be repaid however it depends upon a case by case basis as the legislation around Kiwisaver withdrawals is quite broad.
The information contained in this blog should not be construed as legal or professional advice and you should take advice from a KiwiSaver HomeStart expert, it is not intended to address the specific circumstances of any particular individual or entity.