New Zealand Mortgage: What is the KiwiSaver Tax Credit?
If you’re looking at New Zealand real estate, it’s important to know what the KiwiSaver tax credit is, who can get it and how it can help you purchase a home. As reputable mortgage brokers and independent financial advisers in Auckland, Mortgage Masters can help you better understand the benefits of KiwiSaver and how to make it work for your homebuying goals.
What is KiwiSaver?
So, what is KiwiSaver? KiwiSaver is a voluntary savings scheme to help New Zealanders save for retirement. Contribution rates vary from 3%, 4%, 6%, 8% and 10% of salary, with KiwiSaver contributions from your employer and the NZ Government depending on eligibility.
Employer KiwiSaver Contributions
If you’re saving for retirement through your job, your employer needs to contribute at minimum 3% of your before-tax pay. The employer is taxed on this contribution, so you may get slightly less in your KiwiSaver account. There are a few exceptions to employer contribution requirements. If you’re under 18, on a savings suspension, or eligible to withdraw your funds, employers do not need to contribute to your KiwiSaver. The same goes if they already pay into a compliant savings scheme on your behalf. Otherwise, you can check with your employer directly to better understand how much you will receive each year.
Government KiwiSaver Contributions
The NZ Government will contribute up to $521.43 to your KiwiSaver account each year, as long as you have contributed a minimum of $1042.86 in the financial year. This applies to Kiwis aged 18 or over who either live primarily in NZ, are a government employee working internationally, or volunteer overseas for a charitable organisation. Between employer and government contributions, you can save up not just for retirement, but also for important milestones like buying a house.
How KiwiSaver Works When Buying a Home
KiwiSaver NZ can be used in several ways when purchasing a property. Make your money work for you and explore these KiwiSaver tax credit options based on what kind of real estate transaction you’re interested in.
Buying Your First Home
Many Kiwis are eligible to take out the bulk of their savings to purchase their first home. If you have an eligible fund that’s at least three years old, you may be able to take out thousands to make the purchase happen, so long as you leave a minimum of $1 000 in your account. Keep in mind that not all KiwiSaver funds support first home withdrawals, so you will need to check.
Previous Home Ownership
If you previously owned a home, you may still be able to use KiwiSaver funds for a property that isn’t your first house. In this case, your KiwiSaver provider should point you in the direction of Housing New Zealand, which can determine if your situation is eligible for first home buyer perks.
KiwiSaver First Home Grant
Save money on your first property purchase by applying for a KiwiSaver First Home Grant. If you’ve been contributing to the scheme for three years or more, you may receive up to $10 000 toward your first home. This grant is administered by Kāinga Ora – Homes and Communities and has helped many young Kiwis become home owners.
Embrace the Benefits of Kiwisaver When Buying an NZ Home
Now that you know more about employer and government KiwiSaver contribution rates and how you can use KiwiSaver to purchase a home, you can move forward with our home buying goals. Contact Mortgage Masters today to learn more about your home loan options.