The ability to withdraw money from their KiwiSaver account has helped many New Zealanders into their first home. But for those looking to buy a house that is on a farm property it’s much trickier, and for those living in farm serviced tenancies the KiwiSaver pathway to getting on the property ladder is blocked.
Since December last year, Federated Farmers has been calling for changes to KiwiSaver rules that would aid progression of home ownership for those employed in the primary sector.
“We thought we’d had a bit of a breakthrough at the combined Federated Farmers Meat & Wool and Dairy National Council meeting in February last year when the options developed by the sharefarmer section were signed off to pass on to Minister O’Connor,” Feds Sharefarmer Chair Aaron Passey said.
Agriculture Minister Damien O’Connor was a guest speaker at the meeting and during the subsequent Q&A with farmers, expressed sympathy with the contention that primary industry workers were disadvantaged by the current KiwiSaver first home withdrawal rules. He suggested Federated Farmers write to him outlining the arguments for change.
Once the recommendations were signed off by the Federated Farmers National Council last November, the letter was sent to Damien’s office.
Five months later, in May, the Federation was advised the matter would be referred to the Minister for Commerce and Consumer Affairs, David Clark. It has now been with his office for a month with a response from the minister this week asking for more information of the size and nature of the problem.
“We are disappointed this review took so long,” Aaron said. “It’s an unfairness we believe deserved to be considered with a bit more urgency but we are happy that the conversation is underway.”
A person is eligible for a KiwiSaver first home withdrawal if they’ve been saving with KiwiSaver or another qualifying superannuation fund for at least three years, they’re a first-time property or land owner and they’re going to buy or build their first home and live in it.
The remit that was passed by the Feds National Council earlier in 2021 came up via the Federation’s Sharefarmer section and then its Dairy Council. It called for a review by the government: (a) exploring how it can be made easier to use KiwiSaver funds to help with the purchase of a first home on a farm; and (b) enabling KiwiSaver funds to help a person in a service tenancy situation to buy a house not to live in themselves in the immediate future.
When purchasing a farm, most farms come with one or more houses on a title. Currently, while it is possible to buy a first home on a farm using KiwiSaver funds, there are significant hurdles to overcome, Aaron said.
“The house must be on a separate title, often requiring a subdivision to take place, and must be bought in the person’s name, not their business name (which makes things complicated from a GST perspective with most rural land being sold as “plus GST if any” which requires the purchaser to be GST registered or incur a 15% additional cost). These can add significant costs to a transaction, especially for someone buying their first home.”
On top of that, in many districts, subdivision in rural areas can be very difficult.
The inequity for people living in farm service tenancy arrangements, such as sharemilkers, managers and farm workers also potentially affects others such as teachers, GPs, Defence Force personnel, medical staff living in hospital-provided accommodation, pastoral care providers, and live-in carers.
Many of these people may not be able to live in their own home until they retire.
“Because they can’t reside in the property they would purchase, and their pay package includes a component of ‘rent’, they are basically being discriminated against by the current policy. They cannot use KiwiSaver funds to help purchase a first home as they would not be living in it in the immediate term,” Aaron said.
The farms where they work might be remote from townships and they have little practical choice but to stay in farm accommodation.
The Federation recognises the Government is not keen to encourage residential property investment (in addition to their own home), but capital gains from owning a property is often a key pathway for younger people and mid-farming career staff to progress in the industry, including getting a deposit together to buy their own farm.
“Having a property makes it a lot easier to get lending for other property or cows or equipment,” Aaron said.
“A lot of these workers are in high demand and low supply. We need to ensure they stay in the sectors they’re working in but in doing so, their options for getting on the housing market that are open to other New Zealanders are much more difficult.”
Farming is also a physically demanding job and a ‘house in town’ could provide a safety net should a farm worker suddenly be unable to farm and even the minister himself acknowledged that having their own home will generally have better outcomes in retirement in both asset ownership and social benefits. Hands-on farmers and farm workers are at greater risk of being physically burnt out and retiring earlier than people in more sedentary occupations.
“The inability to have a dwelling to retire to, especially for those that never become farm owners, is of increasing concern.”
Federated Farmers is going to continue to work with the minister and his officials to hopefully come to a solution.