Westpac Term PIE Fund

The Westpac Term PIE Fund ("Term PIE") is a unit trust that works like a term deposit, but is registered as a Portfolio Investment Entity (PIE) for tax purposes. PIEs have special tax rules that could result in less tax on your returns.

It's for you if:

  • you’re a NZ resident individual, organisation or trust with $5,000 or more to invest
  • you want all the features of a term deposit but with potentially greater after-tax returns
  • you’re keen on taking advantage of special tax rules applicable to PIEs, including a maximum tax rate of 28%
  • you don’t require access to your funds for the period of the investment
Benefits

Highlights of the Westpac Term PIE Fund

  • greater after tax returns than a term deposit for investors who have income taxed at a 30% or 33% rate (including certain trusts); and for certain investors who have income taxed at a 10.5% or 17.5% rate.
  • a simple, straightforward way to invest for a fixed time frame – with everything agreed upfront
  • a competitive fixed rate of return to maximise your savings
  • a low risk investment that invests solely in a New Zealand dollar, interest bearing account with Westpac New Zealand Limited (Westpac NZ)
  • a choice of investment terms from 30 days up to 5 years, to suit your financial plans
  • depending on the term, the option to earn regular income from your investment or have it compounded (added to your original investment) for faster growth
  • access to your investment details with Westpac's Online Banking
  • for terms one year and over, you may be able to access up to 20% of your investment, without loss of returns 

Key differences between an investment in the Term PIE Fund & a term deposit

  Term Deposits Westpac Term PIE Fund
Fixed rate yes yes
Fixed term yes yes
Choice of return payment options, including monthly income and compounding returns depending on the term yes yes
Investment type Direct investment into an interest bearing account with Westpac NZ Investment in a unit trust that invests solely into a New Zealand dollar, interest bearing account with Westpac NZ
Minimum investment $5,000 $5,000
Applicable tax RWT
Current maximum rate 33%
PIE Tax
Current maximum rate 28%
Reduced rate for early withdrawals yes yes
Tax benefits

How could I pay less tax through a PIE?

Term PIE and term deposits are taxed at different rates.

In a term deposit, interest on your savings is taxed at your Income Tax Rate (up to 33%) which is based on your taxable income in the current income year (income years generally run from 1 April in any year to 31 March the following year).

When you save through a PIE, returns on your savings are taxed at your Prescribed Investor Rate (or PIR) which is capped at 28%. Your PIR is based on your taxable income over the last two income years and can allow additional PIE income to be earned without an increase in your tax rate on your PIE savings.

If your PIR is lower than your Income Tax Rate, you’ll pay less tax on your savings in a PIE investment than in a term deposit. To find out if your PIR is lower than your Income Tax Rate, use the ‘Best Returns’ calculator, and click ‘Find my rate’. Alternatively, to work out your PIR, see the IRD website and search for 'correct PIR'.

You may pay less tax in a PIE if:

  • You currently earn over $48,000 of taxable income - find out more
  • You’re a trustee or beneficiary of a trust - find out more
  • Your income has recently increased and your income tax rate was 10.5% or 17.5% - find out more
  • You currently earn below, but close to $14,000 or $48,000 and your savings income will push you into the next income tax bracket - find out more

There are some circumstances when a PIE may not be right for you  - find out more.

Investing jointly?

Joint investors are treated as a single investor. The highest PIR of all joint investors applies to the investment so a final tax can be calculated.

To ensure a joint investor isn’t over taxed, you should check that:

  • Each joint investor has a PIR is lower than their Income Tax Rate; and
  • All joint investors have the same PIR.

If a joint investor has a lower PIR than other joint investors, excess tax deducted at the higher PIR cannot be claimed back as PIE tax is a final tax in this situation.

If the PIRs of joint investors are different, joint investors should consider splitting their investment and investing separately in Term PIE. 

A simpler tax return:

Investing in a Term PIE can minimise tax administration for you and Inland Revenue.

If you’re an individual and you tell us your IRD number and correct PIR (or a rate higher than your correct PIR), Term PIE pays a final tax on your return. This means there is no further tax to pay on your Term PIE returns and you don’t have to bother including your Term PIE returns in your tax return (if you have to do one).

If a trust notifies a PIR of 28%, PIE returns are treated as excluded income and these also do not need to be included in the trust’s or its beneficiaries’ tax returns.

Individual investors currently earning over $48,000 of taxable income:

Note - includes those holding an account jointly (but see note on investing jointly above).

If you currently earn over $48,000 of taxable income, your PIR will be capped at 28% and will be lower than your Income Tax Rate – allowing you to save on tax.

Taxable Income*Income Tax Rate
(on interest from 
a term deposit)
PIE Tax Rate (PIR)Tax Benefit on your PIE returns
Over $48,000 and up to $70,000 30% 28% 2%
Over $70,000 33% 28% 5%

 

Trustee or beneficiary of a Family Trust:

A trust (excluding a unit trust or charitable trust) that invests in Term PIE can potentially enjoy the same tax benefits as someone earning over $48,000 of taxable income if it notifies a PIR of 28%.

A trust can either hold income from Term PIE in the trust or pass the income to its beneficiaries.

If income from a regular savings account is held and taxed within the trust as trustee income, it will be taxed at the trustee Income Tax Rate of 33% (except for certain superannuation funds for which an Income Tax Rate of 28% applies).

Taxable Income*Income Tax Rate
(on interest from
a term deposit)
PIE Tax Rate (PIR)Tax Benefit on your PIE returns
Trustee All income levels 33% 28% 5%
Beneficiary
(individual)
Over $48,000 and up to $70,000 30% 28% 2%
Over $70,000 33% 28% 5%
* Examples of taxable income include salary, wages, commission, NZ Super, rent, interest and dividends, student allowances, parental leave, tips and gratuities. When calculating your taxable income to determine your PIR, you must also include non-New Zealand sourced income for the relevant income year, even if you were not a New Zealand tax resident when it was earned. New residents will be able to elect out of this treatment in some cases (see www.ird.govt.nz). For individuals, taxable income does not include PIE income that has been subject to a final tax from PIE compliant KiwiSaver schemes and managed funds including Term PIE.

Notes:

  1. If a trustee elects a 28% PIR, PIE tax will be a final tax. This will result in a tax benefit of: 
    • 5% if PIE income is retained in the trust and taxed as trustee income (where the trustee Income Tax Rate is 33%); or
    • 2% or 5% if the PIE income is instead passed out to beneficiaries on a 30% or 33% Income Tax Rate and taxed as beneficiary income.

  2. If a 28% PIR is selected, the Term PIE income does not need to be included in the trust’s or its beneficiaries’ tax returns.  The PIE income is treated as excluded income. 
  3. See also below ‘When is a PIE not right for you?’ 

You're an individual whose taxable income has recently increased and your income Tax Rate was previously 10.5% (under $14,000) or 17.5% ($14,001 to $48,000):

Your PIR is based on your lower taxable income in either of your previous two income years.

If you earn more taxable income in the current income year than either of the two previous income years and this puts you in a higher income tax bracket, tax on your PIE returns can temporarily remain on a lower rate, for up to two income years.

This situation may occur as a result of a salary increase (e.g. entry or return to full time work) or an increase in rental income.

Example

A student who earned $12,000 in each of the previous two income years from part-time work (and with no other sources of income) now graduates and starts earning a full-time salary of $50,000.

The graduate’s PIR would be 10.5% as this is based on the taxable income of $12,000 earned in each of the previous two income years.

The graduate’s Income Tax Rate and tax on a regular savings account would now be 30% based on the current income year’s $50,000 salary (assuming total taxable income does not exceed $70,000).

If the graduate saved through Term PIE or Cash PIE instead, a tax benefit of 19.5% on PIE returns for two years could be enjoyed, assuming earnings stayed within the $48,001 to $70,000 income tax bracket.

You currently earn below, but close to $14,000 or $48,000 and your savings income will push you into the next income bracket:

You can earn some additional income through a PIE without an increase in your tax rate on your PIE savings.

This is most likely to occur if you currently earn near the upper limit of your income tax bracket – that is, below but close to $14,000 with a 10.5% Income Tax Rate or $48,000 with a 17.5% Income Tax Rate.

If you start or continue to save in a regular savings account, it's likely your taxable income will tip over $14,000 or $48,000.  This will increase your Income Tax Rate to 17.5% or 30% (for the portion of your taxable income above $14,000 or $48,000) respectively.  

However, if you save through a Term PIE account instead, you can save more without an increase in tax on your savings. Your PIR would still stay at 10.5% or 17.5% respectively if your: 

  • Taxable income stays below $14,000 and your total income (taxable income plus PIE income) is not more than $48,000.  In this case, a 7% tax benefit (17.5% - 10.5%) would apply to your income over $14,000; or 
  • Taxable income stays below $48,000 and your total income (taxable income plus PIE income) is not more than $70,000.  In this case, a 12.5% tax benefit (30% - 17.5%) would apply to your income over $48,000.

Example

A retiree earns $47,500 of taxable income each income year from NZ Super, rental income and company dividends.   Additional cash from a property sale and some of the company dividends are placed in Term PIE. 

The retiree can earn income from their Term PIE accounts till their total income (taxable income plus PIE income) reaches $70,000 and still enjoy a PIR of 17.5%. Compared to investing in a regular savings account (see below), this means up to an additional $22,000 of PIE income (i.e. the portion of total income above $48,000) can be earned and still taxed on a lower 17.5% PIR.  

If the equivalent additional income was earned through a regular savings account instead, it would be counted as taxable income and the portion of taxable income over $48,000 would be taxed at 30%.  By investing in Term PIE, the retiree in this example enjoys a 12.5% tax benefit on their income over $48,000.

Companies

There is unlikely to be a tax saving if you are another type of entity, such as a company, investing in a PIE.  However, there could be other benefits (such as time value of money) and other disadvantages (such as impact on provisional tax) that should be considered.

New Zealand tax resident companies have to elect a 0% PIR and will have outstanding tax payable at the company Income Tax Rate of 28%.

If there is more than $2,500 of outstanding tax payable at the end of any tax year, provisional tax is payable in the following year.

Companies that currently pay provisional tax can benefit from the time value of money by saving through a PIE.  Provisional tax instalments occur less frequently than the regular monthly 28% Company Resident Withholding Tax (RWT) deducted from a standard savings account.

Companies that don’t currently pay provisional tax or a low amount of provisional tax may be required to pay more provisional tax as a result of saving through a PIE with a 0% PIR.

Companies that are not New Zealand tax residents have a PIR of 28% - please see comments under ‘Investors who are not New Zealand tax residents’ below.

When is a PIE not right for you?

The advantages of Term PIE don’t apply to everybody and in some circumstances there can be disadvantages.

If you have a PIR that is higher than your Income Tax Rate, you will pay more tax if you save through Term PIE than if you save directly in term deposit.  Before deciding where to save, please compare your current and projected Income Tax Rate and your current and projected PIR.

These situations include:

  • Investors on significantly different incomes who want to invest jointly.

See Investing jointly?’ in the above section.

  • Individuals with a decrease in earnings in the current income year.

PIE tax is based on your taxable income over the last two income years.  Tax on a regular savings account is based on your taxable income in the current income year. If your taxable income decreased in the current income year (e.g. as a result of stopping work), PIE tax could be temporarily higher than tax on a regular savings account.

Example

After earning $80,000 for a number of years, you take time out for maternity leave during which time your taxable income drops to $10,000.  In this situation, your PIR would be 28% as your taxable income in each of the previous two income years was $80,000.  Tax on a regular savings account would be calculated at a 10.5% Income Tax Rate as this is based on your taxable income in the current income year. This tax disadvantage would last until the next income year assuming no other changes to your financial circumstances.

  • Investors who are not New Zealand tax residents.

The PIR of non-tax residents is 28%.  This rate could be higher than the approved issuer levy (AIL) or non-resident withholding tax (NRWT) rate applicable to interest on a regular savings account (generally 2%, 10% or 15%).  

In this situation, less tax would be paid in New Zealand if a regular savings account was used, rather than a Term PIE account. 

Note:

If a non-tax resident is engaged in business through a fixed establishment in New Zealand (i.e. a NZ branch), a 28% PIR still applies.  However, the 28% PIR would equal the 28% company Income Tax Rate on interest from a regular saving savings account, if operated by the NZ branch.  In this case, there is no tax disadvantage through investing in a PIE.

Certain trustees of a trust who elect a 28% PIR. 

PIE income will not be able to be offset against any tax loss that may be available to the trust or the trust may have beneficiaries on an Income Tax Rate lower than 28%.

Individuals with tax losses.

If you are an individual in an overall tax loss position (e.g. due to tax losses from rental properties), you will not be able to claim back any PIE tax on your Term PIE returns as the PIE tax is a final tax.  If you had saved through a regular savings account instead, no tax would be payable on your interest income to the extent it is able to be offset by your tax losses.

Please note:

To ensure you can enjoy the potential tax benefits of PIEs, please provide your correct PIR and IRD number when you open your account. Please review your PIR each year and if your PIR changes due to a change in circumstances, let us know straight away.

The information provided above is general in nature and should not be construed as tax advice. Taxation legislation, its interpretation and the rates, levels and bases of taxation may change. The application of taxation laws depends on your individual circumstances.

Westpac, BT Funds Management (NZ) Limited and Trustees Executors Limited do not accept any responsibility for the tax consequences of your investment in Term PIE. You should seek independent professional advice as to your particular tax position.

How it works

Fees at a glance

There are no transaction or account maintenance fees for the Term PIE Fund - it’s free to set up and operate.

How to invest in the Term PIE Fund

To invest in Term PIE, simply pop into your closest Westpac branch and our trained staff will help you with the paperwork. You will need:

If you are already an existing customer, you can also invest by calling us on 0800 400 600. Before you invest, you need to have received and read the latest Westpac Term PIE Fund Term Sheet.

Reinvesting and repayment options

When you set up your investment in the Term PIE, you can choose to:

  • have your investment (plus returns) automatically reinvested for the same or another term on maturity; or,
  • have your investment paid into any New Zealand bank account when it matures

Prior to your investment in the Term PIE maturing, we’ll send you a reminder notice so you can review your reinvestment or repayment instructions and make any changes before it matures.

Access up to 20% of your Term PIE investment for longer terms 

For Term PIE investments of one year or more, you can access up to 20% of your invested amount (excluding any compounding returns) without loss of returns on withdrawals approved by us provided:

  • you give 32 days’ notice and:
  • your remaining balance does not fall below the minimum investment amount of your investment;
  • you use this option only once during the term of your investment; and
  • the partial withdrawal is not linked to any other early withdrawal.

Please see our Early Withdrawal Policy for conditions.

Early withdrawals

Choosing to invest in the Term PIE means you’re willing to keep your money invested for a fixed time frame.

There’s a seven business days cooling off period starting on the date you invest in the Term PIE. After this period, you can only withdraw all or part of your investment before the end of the fixed term if we agree.

In deciding whether to agree, we apply our early withdrawal policy which may change from time to time. A reduced rate of return will apply if we agree, unless determined otherwise under our Early Withdrawal Policy.

Please refer to our Early Withdrawal Policy for more information.

Managing your investment in the Term PIE Fund

When you invest or reinvest in the Term PIE, you get a certificate that records everything about your investment, including your reinvestment or repayment instructions.

If you choose to have your returns reinvested or paid out to your nominated bank account, you will also receive return payment notices with details of each payment.

If you are invested in the Term PIE on 31 March of any year, you will receive:

  • an end of tax year return payment which can be reinvested or paid to your nominated bank account
  • a copy of the Term PIE Annual Report containing the Term PIE audited financial statements

At the end of the tax year, you will also get a tax certificate.

You can view details of your investment in the Term PIE, including your maturity instructions, through Westpac’s Online Banking.

Term Sheet

For important information about the Term PIE Fund, please download the Westpac Term PIE Fund Term Sheet (PDF). We recommend you read this before making an investment.

How returns are paid

Choose the investment option to suit your needs.

With the Term PIE, you can choose to have your interest paid at maturity, paid out regularly or you can let your investment grow with the compounding option.

Tip: If you want to maximise your savings’ growth, choose a longer investment term with compounding returns.

Returns paid at maturity - up to 12 months

For terms of less than 12 months, returns are paid in full at the end of the term (unless the rate of return relates to a monthly income option).

You can also choose to have returns paid at maturity for terms of 12 months or longer, but remember, if the interest rates are the same, the compounding option allows you to earn more.

Monthly returns - six months or more

For terms of six months or more, you can choose the monthly returns option.

Your returns are paid out monthly, providing you with a regular income. Returns can be paid to any nominated New Zealand bank account.

This is a good option if:

  • you want a regular income during the term of your investment and possibly want to supplement other income like NZ Superannuation
  • you like to manage your finances according to a fixed budget

Compounding returns - 12 months or more

For terms of 12 months or more, you have the option to automatically compound or reinvest your returns quarterly, six monthly or annually.

By earning ‘returns on your returns’, compounding grows your investment at a faster rate than if you had returns paid out during the course of the investment term or paid in full at maturity.

This may be a good option if:

  • you want maximum growth
  • you can wait until the end of the term to get your investment funds and earnings back

Regular returns - 12 months or more

For terms of 12 months or more, you can choose the regular returns option.

You can choose to have your returns paid out every three, six or twelve months.

This may be a good option if you want to receive a periodic income stream (that is less frequent than a monthly income) to supplement your other earnings.

Rates of return

Westpac Term PIE Fund rates of return

Rates are current as at 7 December 2016. Rates of return are before tax and are subject to change without notice. 

Rates for amounts of $250,000 or more are available on request.

For important information about the Term PIE Fund download the Westpac Term PIE Fund Term Sheet.

Westpac Term PIE Fund - Rates of return
TermReturn Frequency$5,000-$9,999$10,000-$249,999
30 - 59 days At Maturity 0.35% p.a. 0.35% p.a.
60 - 89 days At Maturity 1.50% p.a. 1.50% p.a.
90 - 119 days At Maturity 1.50% p.a. 2.50% p.a.
120 - 149 days At Maturity 2.00% p.a. 3.40% p.a. <span>Special rate. Special rates not available to financial institutions or for investments over $5,000,000 and cannot be used in conjunction with any other Westpac promotion, offer or package benefit.</span>
150 - 179 days At Maturity 2.00% p.a. 2.80% p.a.
180 - 269 days At Maturity
Monthly
2.00% p.a.
2.00% p.a.
3.35% p.a.
3.35% p.a.
270 days < 12 months At Maturity
Monthly
2.00% p.a.
2.00% p.a.
3.10% p.a.
3.10% p.a.
12 months < 18 months At Maturity
Monthly
Compounding
2.50% p.a.
2.50% p.a.
2.50% p.a.
3.40% p.a.
3.30% p.a.
3.30% p.a.
18 months < 2 years At Maturity
Monthly
Compounding
2.50% p.a.
2.50% p.a.
2.50% p.a.
3.20% p.a.
3.10% p.a.
3.10% p.a.
2 years < 3 years At Maturity
Monthly
Compounding
2.50% p.a.
2.50% p.a.
2.50% p.a.
3.70% p.a. <span>Special rate. Special rates not available to financial institutions or for investments over $5,000,000 and cannot be used in conjunction with any other Westpac promotion, offer or package benefit.</span>
3.70% p.a. <span>Special rate. Special rates not available to financial institutions or for investments over $5,000,000 and cannot be used in conjunction with any other Westpac promotion, offer or package benefit.</span>
3.70% p.a. <span>Special rate. Special rates not available to financial institutions or for investments over $5,000,000 and cannot be used in conjunction with any other Westpac promotion, offer or package benefit.</span>
3 years < 4 years At Maturity
Monthly
Compounding
3.00% p.a.
3.00% p.a.
3.00% p.a.
3.30% p.a.
3.10% p.a.
3.10% p.a.
4 years < 5 years At Maturity
Monthly
Compounding
3.00% p.a.
3.00% p.a.
3.00% p.a.
3.35% p.a.
3.15% p.a.
3.15% p.a.
5 years At Maturity
Monthly
Compounding
3.00% p.a.
3.00% p.a.
3.00% p.a.
3.40% p.a.
3.20% p.a.
3.20% p.a.

 

Westpac Term PIE Fund - Returns paid at maturity
For terms less than 12 months, returns are paid in full at the end of the term (unless the rate of return relates to a monthly income option). You can also elect to have returns paid at maturity for terms 12 months or longer.

Westpac Term PIE Fund - Monthly income
For terms of six months or longer you can choose to have returns paid monthly into your nominated bank account. This regular income stream can be ideal if you need to supplement other income such as NZ Superannuation.

Westpac Term PIE Fund - Compounding & regular return
For terms 12 months or longer, you can choose to have returns paid every three (quarterly), six or 12 months. The default payment frequency is quarterly. Returns can be compounded (added automatically to your original investment) which allows you to earn ‘returns on your returns’, meaning your investment grows at a faster rate than if returns were paid out during the course of the investment or paid in full at maturity. Alternatively, you can choose to have returns paid separately into any New Zealand bank account which allows you to receive a periodic income stream that is less frequent than our monthly income option.