The Prescribed Investor Rate (PIR) is the tax rate that is applied to the taxable investment income earned on your savings under Portfolio Investment Entities (PIEs). Typically your KiwiSaver investments will be PIEs. Favourable tax rates were applied to PIEs when they were created several years ago in order to encourage New Zealanders to invest and save.
For NZ resident individuals the PIR can be 10.5%, 17.5% or 28%. The rate is dependent on your total taxable income and PIE income from the previous two financial years.
As a general guide:
- If your total taxable income is $14,000 or less in either year and that income plus PIE income was $48,000 or less in either year, then your PIR is 10.5%
- If your total taxable income is $14,000 or less in either year and that income plus PIE income was between $48,001 and $70,000 in either year, then your PIR is 17.5%
- If your total taxable income was between $14,001 and $48,000 and that income plus PIE income was $70,000 or less in either year, then your PIR is 17.5%
- If your total taxable income is $48,001 or more in either year, or your total taxable income plus PIE income was $70,001 or more in either year, then your PIR is 28%
If for the two previous income years you qualify for two rates due to varying income thresholds, your PIR will be the lower rate. Therefore your 2017 (financial year) PIR is based on the lower of the PIE Incomes and Taxable Incomes for 2016 and 2015.
Many taxpayers are paying too much tax and occasionally some tax payers are paying too little tax. If you have overpaid you are unable to have the overpayment refunded. Conversely, if you have not paid enough tax then you are liable to pay the shortfall.
We encourage you to check your PIR tax rate each year to ensure your investments are being taxed at the correct level.
Please contact us if you would like to know more about calculating or changing your PIR tax rate.