Why you should check your KiwiSaver tax rate

Inland Revenue has identified that 450,000 people have been paying the wrong rate of tax on their KiwiSaver accounts and other managed funds. This highlights the importance of understanding what rate of tax you should be paying on your KiwiSaver, and to check that you are paying the correct amount.

The implementation of a new automated tax system has allowed the IRD to detect more clearly what rate of tax that people should be paying on their KiwiSaver accounts and other investment savings. The IRD will be contacting those who have been paying the incorrect prescribed investor rate (PIR) on managed funds like KiwiSaver.

The PIR determines how much tax you pay on your portfolio investment entities (PIEs). Members and their employers both make contributions to KiwiSaver, before the fund manager then invests those both locally and overseas. Any returns are then taxed by the IRD. The prescribed guideline rates are 10.5% for those earning a taxable income of below $14,000, 17.5% for those earning between $14,000 and $48,000, and 28% for those earning over $48,000.

To avoid paying the wrong tax rate, members should work out their estimated income, which will then tell you what your PIR rate is likely to be. You may consider contacting your fund manager to further check the details of what tax rate you are paying and to inform them of your correct PIR, as your income earned from a fund may be taxed at the default rate of 28% without your knowledge.

For further information on taxable income, PIRs and to determine your correct PIR, you should consult your professional tax advisor.

Posted on 18 June '19 by , under super.