Tax on KiwiSaver and Investment Funds

KiwiSaver and Investment Funds are Portfolio Investment Entities (PIEs). PIEs are subject to special tax rules and tax on PIE income is calculated using your prescribed investor rate (PIR) less any tax credits used.

Note that if you’re investing jointly, we will apply the highest PIR of the joint investors.

PIE income is the taxable income (or loss) from your investment as determined under PIE tax rules. PIE income is calculated based on the type of assets the PIE holds. For example, dividends from NZ equities (shares) are taxable but capital gains from NZ equities are not.

Tax deductions for fund fees, such as management fees and fund expenses, have already been offset against your PIE income. PIE income is calculated each day unit prices are calculated, and your share is based on the number of units you hold in the fund.

PIR is the tax rate supplied by you, or as advised by Inland Revenue if they provide us with a different PIR for you. 

Tax credits used are the amount of foreign and/or NZ tax credits attributed to you as an investor and used to offset your tax liability. This can include tax withheld on foreign dividends, and/or imputation credits attached to NZ dividends. Your share of tax credits is based on the number of units you hold in the fund.  

This table shows what’s included in PIE income for each asset type. Note that:

• The income components are attributed to you as PIE income, so you won’t see these shown separately on your Tax Certificate
• For most international equities, the Fair Dividend rate (FDR) method must be used to calculate PIE income. This is 5% of the opening market value of those equities, calculated each pricing day. This is incurred irrespective of whether your account balance goes up or down.

For information on which funds invest in which asset types, see our Statement of Investment Policy and Objectives (SIPO):

PIE income is not the same as the return on investment.

Different tax rules apply to different asset types (see table above). For equities (shares):

• Gains and losses are not included in PIE income
• Most international equities must use the Fair Dividend Rate (FDR) method to calculate PIE income.

So the overall investment return could be a loss but you may still have PIE income and a tax liability.

If your fund invests in international equities (shares), there will be PIE income from these equities even if they have decreased in value. Growth funds have a higher proportion of international equities.

PIE income on most international equities is 5% of the opening market value of the equities, calculated each pricing day using the Fair Dividend Rate (FDR) method.

A fund with a mix of New Zealand equities (shares) and cash assets could have an investment loss, for example if the equities fell sharply in value and the cash assets made a small gain.

Your PIE income will include the gains and interest from the cash assets and dividend income from the NZ equities. The losses from the NZ equities don’t form part of your PIE income.