If you earn income from interest or dividends, or if you pay business interest to investors, it’s a good idea to understand how Resident Withholding Income and Tax (RWT) affects you.

Resident withholding income includes interest and dividends. Generally, resident withholding tax (RWT) must be paid on it.

If you are a New Zealand tax resident earning income from interest and dividends from New Zealand bank accounts and investments, you will be liable for RWT unless you have a certificate of exemption from RWT, or an exempt status issued by Inland Revenue. Your bank or fund manager will deduct the tax before they pay you.

If you are liable for RWT, how much you pay depends on a number of factors such as the type of resident withholding income, your overall income, and whether you have supplied your IRD number to the interest payer. From 1st October 2021, a new rate for RWT came into effect for taxpayers earning over $180,000 per year. You may have tax to pay if this rate applies to your income for the year ending 31 March 2022.

If you pay more than $5,000 in business-related interest per year (other than to a bank or normal lending institution or to a person who has provided you with their IRD certificate of exemption), you should register with Inland Revenue as an RWT payer. You must deduct RWT at the time you pay interest to the recipient. Inland Revenue can charge significant penalties and interest on RWT deductions not made properly.

If you have questions about Resident Withholding Income and Tax, please contact us – we’re here to help.