Are you on the right KiwiSaver tax rate (PIR)?

Are you paying too much tax (PIR) on your KiwiSaver account? If you are, you’ll never see that money again.

Most other kinds of tax can be refunded by the Inland Revenue Department, but what many people don’t know is that the KiwiSaver rules are different. They don’t allow the IRD to refund any tax you’ve mistakenly overpaid.

In fact, the results of either underpaying, or overpaying, the wrong tax rate, called your PIR (short for Prescribed Investor Rate), on a PIE (Portfolio Investment Entity) investment such as your KiwiSaver account are drastic.

Don’t overpay or underpay

Too much: If the rate you tell your provider is too high, you’ll pay too much tax, and the tax rules don’t allow IRD to refund you. You lose that money.

Too little: If you tell your provider too low a rate, you won’t have paid enough tax and that becomes a problem.

If that happens, the tax rules say you have to put in a tax return which includes your share of the fund’s investment income. Usually, most wage and salary-earners don’t need to put in a tax return at all, but if you’ve underpaid, you’ll have to.

Then you’ll have to pay top-up tax at your ‘marginal’ tax rate – which is the amount of tax paid on an additional dollar of income. That could be as high as 33 per cent, much more than most people pay.

Either way, it’s not good.

Which rate is right for you?

For individual New Zealand tax residents, there are three main rates you could be paying, called your PIR.

  • 10.5%
  • 17.5%
  • 28%

Check which rate you should be on at Inland Revenue and check with your employer or provider that you’re being taxed at that rate.

Information correct as at July 2022. Pie Funds Management Limited is the issuer and manager of the JUNO KiwiSaver Scheme. Click here for our Product Disclosure Statement. Any advice is given by Pie Funds Management Limited, and is general only. It relates only to the specific financial products mentioned and does not account for personal circumstances or financial goals. Please see a financial adviser for tailored advice. You may have to pay product or other fees if you act on any advice. As manager of the Scheme we receive monthly fees that are determined by your balance and whether you are 13 years or over. We will benefit financially if you invest in our products. We manage any conflicts of interest via an internal compliance framework designed to ensure we meet our duties to you. For information about the advice we can provide, our duties and complaint process and how disputes can be resolved, visit www.junofunds.co.nz. All content is correct at time of publication date, unless otherwise indicated. Past performance is not a reliable indicator of future returns. Returns can be negative as well as positive and returns over different periods may vary. Please let us know if you would like a hard copy of this disclosure information.