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Will I Be Eligible For The First-Home Deposit Subsidy?

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Contributor:
Mary Holm
Mary Holm

Question:

I have been voluntarily contributing to KiwiSaver at the rate of $20 a week since mid-May 2008, just after I turned 18.

I have concerns about whether or not I would be eligible for the first-home deposit subsidy - which as far as I know states you must have been contributing 4 per cent of your income for three years.

During this time I received a student loan and was studying full-time without work.

I have recently started to receive the student allowance (at $193.46 a week with the accommodation supplement), which now counts as my income, so I'm contributing 4 per cent of that.

What I am worried about is whether or not my contributions from May 2008 until the time I started to receive the allowance would count towards the 4 per cent contribution to KiwiSaver.

That is, if I were to have no income, and contribute voluntarily for three years at $20 a week, would this satisfy the requirements for the home deposit subsidy? If you could clarify this it would be much appreciated.

Answer:

Mary Holm: Good on you for planning towards buying a house so young. And it looks as if you're on target to get the KiwiSaver first-home subsidy.

The Government announced a couple of weeks ago that employees must save 2 per cent of their pay - down from the previous 4 per cent - to qualify for the subsidy.

If you save at least 2 per cent for three years, you get $3000 towards your first home. That rises gradually to $5000 after five or more years.

Because a student allowance is taxable income, it's treated similarly to wages in this situation. That means you could reduce your contributions now to 2 per cent of your allowance if you wish.

Housing Minister Phil Heatley said then that "the same principle will apply" for non-employees, but details weren't available. He has now given more specific information about the requirements for non-employees, as follows:

The self-employed will need to save 2 per cent of their gross (before tax) taxable income in the year prior to the financial year in which the contributions are made. In other words, look at last year's tax return.

Beneficiaries will need to save 2 per cent of their gross benefit.

Other non-earners - who would include non-working students, caregivers and others - will need to save 2 per cent of the minimum annual wage, which amounts to $520 a year or $10 a week.

People in all three groups can contribute either regularly, once a year, or in any other pattern - just as long as they get the required amount into their account each year, says a Housing New Zealand official.

It's great to have that spelled out at last. And you read it first here!

But under the previous rules non-employees had to save "around 4 per cent" of their gross pay. What if somebody's saving, up until now, has been high enough to meet the new rules, but not the old rules? Will that period of saving count towards their three to five years for getting the subsidy?

"That's a good question," says the official. "We're going to get back to the ministers (of housing and finance) on this." I'll put new developments in this column. That's not a concern for you. Your $20 a week before you got the student allowance easily covers you.

 

Mary Holm is the author of bestselling books on KiwiSaver and personal finance. She is also a highly praised seminar presenter. Her written advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following that advice.       

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