Tax benefits of a Cash PIE
A prescribed investor rate (PIR) is the rate used to calculate how much tax you’ll pay on your portfolio investment entity (PIE) taxable income. Your KiwiSaver Scheme is an example of a PIE.
Depending on your circumstances you could choose a PIR of:
Why you need to check your PIR
It's important that your bank always has your correct PIR because:
- if you notify your bank of a PIR that is lower than your correct PIR, you will be liable to pay tax on PIE income attributed to you at your marginal tax rate (plus any penalties and interest) and to file a tax return; or
- if you notify your bank of a PIR that is higher than your correct PIR, you will not be able to claim back the excess tax paid.
- your notified PIR is 0%; or
- you are a new resident who chooses not to include your non-resident foreign-sourced income to determine your PIR; or
- you are a trust which has notified a PIR of less than 28%; then
you will be responsible for paying tax on the income attributed to you.
If you are a trust which has notified us that you have a PIR of 10.5% or 17.5%, or you are a new resident as described above, a credit is available for the tax paid by a Fund on your behalf. In the case of joint unit holders with differing PIRs the higher notified PIR is used.
If you notify us of a change to your PIR after the beginning of the tax year, the tax payable by a Fund on PIE income which is allocated to you will be recalculated using the new PIR notified to us by you. However, there will be no recalculation of any tax which has already been paid to the IRD on your behalf before we receive the notification.
How to calculate your PIR
1. Taxable income for New Residents: In determining your PIR, gross income earned from foreign sources while you were a non-resident must be treated as if it were taxable income. However, you may choose that this rule does not apply if you expect that your taxable income in either of your first two years as resident will be significantly lower than your total income in the income year prior to becoming a New Zealand resident. In that case, you will be taxable at your marginal tax rate on your returns from a Fund, with a credit being available for any PIE tax paid.
2. Joint account holders will be treated as one account holder, with a PIR equal to the highest PIR of the joint account holders.
3. If you choose a PIR of less than 28%, you will need to include PIE income in the Trust’s tax return. A tax credit will be available for any PIE tax paid.
If for the two previous income years you qualify for two rates, your PIR is the lower rate
The tax-smart, fixed-term investment that works like a term deposit. You get the certainty of a fixed rate, with the added benefit of potentially paying less tax.
This information is based on our understanding of taxation law that applies as at September 2017. It’s intended as a guide only. Tax legislation, its interpretation and the rates and basis of taxation are subject to change. For tax advice relating to your specific circumstances, we recommend that you consult a professional tax adviser.
If you do not notify your KiwiSaver provider of your PIR or your IRD number then your income earned from a Fund will be taxed at the default rate of 28%.
The Commissioner of Inland Revenue can, by notice, require a Fund to apply a different PIR to the PIR notified by you. In this case, the Fund would have to apply the PIR that the Commissioner considers appropriate.
For more information about taxable income, PIRs and to determine your correct PIR please refer to the IRD website or contact your professional tax adviser.
The information on this page is general in nature and does not constitute specific tax advice to any person. We recommend you obtain independent tax advice for your own circumstances.