In NZ, all investment returns are taxed
In New Zealand, you pay tax on the returns, interest and dividends generated by most investments, including savings in the bank, term deposits, KiwiSaver, shares and managed investment funds, like Midlands. The tax you normally pay is based on your personal tax rate or RWT.
The Government introduced PIE tax rules in 2007 to encourage NZ’rs to invest and save more for retirement.
What is a Portfolio Investment Entity or PIE Fund?
– If you invest with Midlands, you are investing in a Portfolio Investment Entity or PIE Fund.
– A PIE Fund is a type of investment entity that can offer certain tax advantages to many individual investors.
– That’s because it has special tax rules that only apply if you are invested in a PIE Fund.
– A PIE Fund’s returns are taxed at each investor’s Prescribed Investor Rate (PIR), which may be lower than your personal income tax rate or the Trust Tax Rate.
– If you invest in a PIE Fund, and are resident in NZ, under current rax rules you will pay either 10.5%, 17.5% or 28% tax on your returns. You will not pay more than 28%.
– If you are NOT invested in a PIE Fund, the tax you pay will be based on your personal tax rate or the Trust Tax rate and could be as high as 39%.
Top Trust Tax Rate Increased to 39%
– On the 1st April 2024, the Government increased the top Trust Tax rate from 33% to 39%, aligning it with the top personal tax rate.
– This means that any investments you have in the name of a Trust, that are NOT in a PIE Fund, will normally be taxed at 33% or 39%.
– Either way, if you invest in an investment fund which is a PIE Fund, like the Midlands Smarter PIE Fund, you will pay 28% tax.
PIE Fund Tax Advantage
Trust Tax Rate from 1st April 2024
39%
From 1st April 2024, if you invest in a Fund which is NOT a PIE Fund via a Trust, and the Trust earns above $10,000 per year the income will be taxed at a rate of 39%.
*Assuming the income is retained in the Trust
Highest Personal Tax Rate
39%
If you earn over $180,000 and invest in a Fund which is not a PIE Fund, your investment returns will be taxed at 39%.
More than $180,000 = 39%
$78,101 – $180,000 = 33%
$53,301-$78,100 = 30%
$15,601-$53,300 = 17.5%
Up to $15,600 = 10.5%
Highest Tax Rate if you invest in a PIE Fund
28%
If you invest in a PIE Fund, PIE Fund Tax Rates (or Prescribed Investor Rates) apply. You will pay either 10.5%, 17.5% or 28% tax on your returns.
You will not pay more than 28%.
How do I pay the tax on my investment?
One of the benefits of a PIE fund is that we take care of all the tax obligations for you. Individuals don’t need to file a personal tax return for this investment. The PIE Fund itself is responsible for filing income tax returns and paying tax on behalf of its investors. This means you do not need to file a tax return simply due to your investment in a PIE (provided you give us the correct PIR rate).
What do I need to do?
To ensure that you are taxed at the correct rate, you need to let us know what your Prescrived Investor Rate (PIR) is. If you do not advise us of your PIR Rate, you will be put on the default PIR rate of 28% and you may pay more tax than you should.
What is my Prescribed Investor Rate (PIR)?
Your PIR is determined by your taxable income and ranges from 10.5% to a maximum of 28%. To work out your PIR, try our handy PIR calculator here.
