Can You Use KiwiSaver to Buy a House in Australia?

Can you use your KiwiSaver to buy a house in Australia?

The short answer is yes. But you will be restricted to a maximum of A$15,000.

It’s pretty straightforward to transfer your KiwiSaver to a compatible Australian super fund. You can learn more about this in our story How to Transfer KiwiSaver to Australian Super.

And once your chosen KiwiSaver funds are parked in your Australian superannuation scheme of choice, they will then become eligible for use under the Australian government’s First Home Super Saver (FHSS) scheme.

The FHSS scheme works just like saving for a deposit using KiwiSaver: it provides an investment tool to help save for a deposit on a first home while paying less tax on your investments. It allows you to withdraw up to A$50,000 of your investments, plus any associated earnings, to put towards a first home in Australia.

Unlike KiwiSaver, under the FHSS scheme, only voluntary payments you make can be withdrawn. This is money that you have chosen to save each month, not employer contributions. And, fortunately, KiwiSaver funds are considered voluntary.

However, when you transfer your KiwiSaver funds to an Australian super fund, they are regarded as a single voluntary contribution, tied to the date of the transfer. As the Australian Tax Office outlines on its website: “You can’t split this contribution over different financial years.”

This limits the amount of your KiwiSaver you can put towards an Australian home, as you can only apply to have a maximum of A$15,000 of voluntary contributions from any one financial year included in the total funds released under the FHSS scheme, which are capped at A$50,000 contributions across all years.

Here’s how the FHSS scheme works:

What is the FHSS scheme?

The First Home Super Saver Scheme allows you to make voluntary contributions into your Australian super to put towards a home deposit. This money (plus the associated earnings) can then be withdrawn to help purchase your first home. You can’t withdraw any contributions made by your employer under the scheme.

How does the FHSS scheme work?

You can make voluntary concessional (before-tax) contributions, such as through salary sacrificing, or you can make voluntary non-concessional (after-tax) contributions, for example making contributions from your take-home pay.

Under the scheme, you can make voluntary contributions up to A$15,000 per financial year. This is subject to the normal super contribution caps, currently A$27,500 per year for concessional contributions.

How much can I save for a deposit with the FHSS scheme?

The most you can withdraw through the scheme is A$50,000, plus any money your investments have made. Couples are allowed to pool their savings together, so you could potentially release A$100,000 (plus earnings) to purchase a single property. As we mention above, you can only withdraw up to A$15,000 from any one financial year.

As part of this, the Australian Taxation Office (ATO) says you can withdraw 85% of your eligible before-tax contributions (such as salary sacrificing amounts) and 100% of any after-tax contributions (such as take-home pay amounts).

You will also receive the earnings for those contributions. These earnings are calculated using a deemed rate of return, not the actual rate your super fund delivers. The deemed rate is based on the ATO’s shortfall interest charge (SIC) rate and is currently 7.38%.

What are the benefits of the FHSS scheme?

As with KiwiSaver, a main benefit of the FHSS Scheme is its potential tax savings. By saving within your super fund, you will be able to take advantage of the favourable tax treatment that applies to super savings.

Voluntary concessional contributions (such as salary sacrificed amounts) are typically taxed at 15%, while voluntary non-concessional contributions are not taxed at all.

This is compared to investments outside of super, which are taxed at Australia’s normal marginal tax rates (which can be as high as 45%, depending on your income).

When you withdraw your money from the scheme, your concessional contributions (and their associated earnings) will be taxed, but you’ll get a 30% tax offset on your tax rate, which is 32.5% for those earning between A$45,001 and A$120,000. And any eligible non-concessional contributions won’t be taxed at all.

So, for example, if you earned A$90,000 per year, you would be taxed at a marginal rate of 32.5% plus Australia’s 2% Medicare Levy, less the 30% tax offset. This means you would pay an extra 4.5% in withdrawal tax.

Compare KiwiSaver Providers with Canstar

The comparison table below displays some of the products currently available on Canstar’s database for a KiwiSaver member with a balance of $50,000 in a Growth fund, sorted by Star Rating (highest to lowest), followed by company name (alphabetical) – some may have links to providers’ websites. Use Canstar’s KiwiSaver comparison selector to view a wider range of retirement funds. Canstar may earn a fee for referrals.

To read more about our latest KiwiSaver Awards click this link or to compare KiwiSaver providers, click on the button below.

Compare KiwiSaver funds with Canstar

About the author of this page

This report was written by Canstar’s Editor, Bruce Pitchers. Bruce has three decades’ experience as a journalist and has worked for major media companies in the UK and Australasia, including ACP, Bauer Media Group, Fairfax, Pacific Magazines, News Corp and TVNZ. Prior to Canstar, he worked as a freelancer, including for The Australian Financial Review, the NZ Financial Markets Authority, and for real estate companies on both sides of the Tasman.