Tax on investments and savings
You pay tax on income from all your savings and investments, whether they're in NZ or overseas. Your tax rate is based on your income.
Paying tax on investments and savings in NZ
All NZ citizens and residents pay either Resident Withholding Tax (RWT) or tax at the Prescribed Investor Rate (PIR) on income from savings and investments in New Zealand. You need to choose the correct tax rate or you could face an unexpected bill at the end of the tax year.
Tell your provider — that is, your bank, fund manager or financial advisor:
- your IRD number
- the tax rate you should pay, based on your income.
If you have a joint investment, you should use the tax rate of whoever earns the most.
Rates for RWT
If you earn:
- $14,000 or less, choose 10.5%
- between $14,001 to $48,000, choose 17.5%
- between $48,001 to $70,000, choose 30%
- over $70,000, choose 33%.
If you don't give your provider your IRD number or let them know what tax rate they should use, they must tax your interest and investment income at 33%. If this rate isn't correct you could pay too much tax.
If you started your investment or savings account before 1 April 2010 and only gave your provider your IRD number, you'll pay 17.5% tax on your interest and investment income. If this rate is wrong, you might have to pay more tax at the end of the year.
Rates for PIR
If your investment is in a Portfolio Investment Entity (PIE) — for example managed funds like KiwiSaver — you pay tax at a different rate, known as PIR. Depending on your income, you pay between 10.5% and 28% tax.
How tax is collected
Your bank or financial provider deducts tax when they calculate the interest or dividends you've earned. This happens at least once a year. They pay the tax on your behalf to IRD and give you a statement of the tax you've paid in that financial year. They'll either:
- send the statement (IR15) to you, or
- ask you to log into your IRD account (My IR) and download it.
Changing your tax rate
To change the tax rate on your interest or investment income, complete an IR456 form and give it to your financial provider. Sometimes you can also do this over the phone or online.
If you have overseas investments
You have to pay tax on any foreign investments you have, even if you're a newly arrived resident.
Overseas investments include:
- pension schemes
- shares in foreign companies
- rental properties in another country
- bank accounts.
The tax rules for foreign investments are complicated. They vary depending on what kind of investments you have and which country your investments are held in.
If you've received overseas income that's also been taxed in another country, you may be entitled to a credit for the tax already paid. You'll receive a credit for the smaller amount of tax you paid — either the tax due in NZ on that investment or the tax you paid overseas.
Most people with foreign investments seek professional advice from a tax agent or financial adviser to ensure they pay the right tax.
If you get an overseas pension
Tax on overseas pensions is complex. How the tax is managed depends on:
- whether your overseas pension is a government or private pension
- whether the New Zealand Government has a tax agreement with the country your pension comes from
- what other sources of income you have.
As well as paying tax on the income you receive, you may also have to pay tax on gains made by the overseas fund providing your pension.
To make sure you pay the right tax, you can apply to IRD for a special tax code.
If you're not a resident of NZ for tax purposes
If you're a new resident or a New Zealander returning from overseas
New residents and New Zealanders who have been living outside New Zealand for at least 10 years can get an exemption from paying tax on some investments.
Your exemption lasts for up to 4 years and means you don't pay PIR on income that you get from foreign investments as long as:
- the income from them is made outside New Zealand
- the investment is in a zero-rated PIE.
Some other overseas income is exempt from tax, including rent, royalties and capital gains from the sale of property.
Exemptions from paying RWT
Individual taxpayers can't usually get an exemption from paying RWT. You might be exempt if you:
- have earned or think you'll earn more than $2 million a year
- can prove that, because of losses or other circumstances, you would be due a RWT refund of $500 or more.
To ask for an exemption, complete the application form (IR451).