PIEs and PIRs
If a managed fund is a PIE (Portfolio Investment Entity), there are some important tax advantages.
(All KiwiSaver default schemes are PIEs, as well as many other KiwiSaver schemes and non-KiwiSaver superannuation schemes.)
If you invest in a PIE the tax on the income from your investment will be based on your "prescribed investor rate" (PIR). The PIR is based on your taxable income in the last two income years.
PIE changes from 1 October 2010
Changes to PIE tax rates took effect from 1 October 2010. For more information, visit the Inland Revenue website.
The tax paid by a PIE on your behalf is in most cases a ‘final’ tax. If you normally don't file a tax return, you won't have to file one because you have invested in a PIE.
What is your PIR?
Each year the PIE will ask you what your PIR will be for the coming year, and explain how to work that out.
From 1 October 2010 there are four PIRs (prescribed investor rates): 0%, 10.5%, 17.5% and 28%.
If you don't supply your PIR, the PIE will tax you at 28% (reduced from 30% on 1 October 2010).
If you hold PIE investments jointly with your spouse, de facto or civil union partner, tax will be calculated at whichever PIR is the highest.
For more information about PIEs and PIRs, visit the Inland Revenue website.
