RWT and PIR Explained

💵 Resident Withholding Tax on Interest

How RWT Works

When your bank pays interest on a savings account or term deposit, it deducts RWT and sends it to Inland Revenue. The rate you choose should line up with your income tax rate, so the deduction roughly matches what you actually owe on that interest.

Choosing Your RWT Rate

• Match it to your income: Pick the RWT rate that aligns with your marginal tax rate.
• Give your IRD number: Without it, interest can be taxed at a high no-declaration rate.
• Update it if your income changes: A pay rise or drop can change the right rate.

What If the Rate Is Wrong?

If your RWT rate is too low, you may have more tax to pay when your income is squared up. If it is too high, you may get some back. Either way, choosing a rate that matches your income keeps things tidy.

📊 The Prescribed Investor Rate for PIE Funds

What a PIE Is

A portfolio investment entity, or PIE, is a common structure for KiwiSaver funds, managed funds, and some term deposits. Income from a PIE is taxed at your PIR rather than your full income tax rate, and the PIR is capped at a maximum.

How Your PIR Is Worked Out

Your PIR is based on your income over the last two years, using the lower of the two years in the standard test. There are a small number of set PIR rates, and you tell your fund which one applies to you.

Why Getting the PIR Right Matters

• Too low: You underpay, and Inland Revenue can issue a bill to square it up.
• Too high: You may overpay tax on your investment income.
• The cap helps higher earners: Because the PIR is capped below the top income tax rate, PIE income can be taxed at a lower rate than other income for high earners.

💡 Getting It Right and Common Mistakes

Common Mistakes

Mistake 1: Not Giving Your IRD Number

Leaving your IRD number off a savings account can mean interest is taxed at the highest no-declaration rate. Always provide it.

Mistake 2: Leaving the Default PIR

If you never set a PIR, a fund may use the highest rate. Many people overpay simply because they never told their fund the right rate.

Mistake 3: Setting a Rate Too Low to Pay Less Now

Choosing a low rate does not avoid the tax; it just defers it. You can end up with a bill when your income is squared up.

Mistake 4: Never Reviewing After an Income Change

A new job, a pay rise, or stopping work can all change your correct RWT rate and PIR. Review them when your income changes.

A Simple Check

For tax basics that sit alongside this, see our Progressive Tax System guide, and the NZ Tax Rates reference for current figures.

Final word: RWT and PIR are how the tax on your savings and investments is collected before you ever see the money. The whole game is using the right rate: provide your IRD number, match your RWT rate to your income, and set the correct PIR with each fund. Review after income changes. This is general information, not personalised advice, and the rates and thresholds can change, so confirm the current figures.