Examples of when PIE might not be suitable for you

Comparing tax rates.

The advantages of a PIE don't apply to everybody and in some circumstances, there can be disadvantages.

If you have a Prescribed Investor Rate (PIR) that is higher than your income tax rate, you will pay more tax if you save through a PIE than if you save directly in a regular savings account or term deposit. Before deciding where to save, please compare your current and projected income tax rate and your current and projected PIR.

Here are some examples to consider.

Example 1:

Investors who are not New Zealand tax residents

The PIR of non-New Zealand 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 PIE.

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

Example 2:

Certain trustees 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 as it is excluded income, or the trust may have beneficiaries on an income tax rate lower than 28%.

Example 3:

Individuals with tax losses

If you are an individual in an overall tax loss position, you will not be able to claim back any PIE tax on your 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.

Next steps.

Understanding your PIR

Learn more

Explore your savings options

Learn more

Things you should know.

To ensure you can enjoy the potential tax benefits of PIEs, you must provide your IRD number and your correct PIR 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 on this webpage is intended for general tax information and illustrative purposes only, it does not constitute tax advice, and should not be relied upon for tax purposes.

This information is based on legislation current as at October 2020. Taxtation legislation, its interpretation and the rates, levels and bases of taxation may change. You should seek professional advice on the tax implications of investments based on your particular circumstances.

Westpac, BT Funds Management (NZ) Limited and Trustee Executors Limited do not accept any responsibility for the tax consequences of your investment in a PIE.

Examples of when PIE might not be suitable for you.