Portfolio Investment Entities (PIEs)
What is a PIE?
How does PIE tax work?
What is my PIR?
What do I need to do?
The benefits of PIEs
What is a PIE?
A Portfolio Investment Entity (PIE) is a type of managed fund that meets certain criteria and elects to be subject to the PIE rules.
Investors in a PIE are generally taxed at their chosen tax rate, referred to as a ‘Prescribed Investor Rate’ (PIR).
In order to pass on this advantage and benefits listed below, most of OnePath’s retail superannuation schemes and New Zealand resident unit trusts (including those it administers for ANZ National Bank) are PIEs.
Note: the following entities managed by OnePath are not PIEs – Ascent Funds and ANZ Life Bonds.
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How does PIE tax work?
Under the PIE regime, OnePath meets individuals’ and certain other investors’ tax obligations by cancelling units in the PIE to reflect the tax payable. We then pay the tax to Inland Revenue. This takes place at the end of each tax year, or when you fully withdraw, switch or transfer.
Tax rebates are paid by issuing additional units. You are provided with a tax certificate at the end of each tax year, detailing your PIE taxable income, foreign and New Zealand tax credits, and the PIE rebates received or tax paid.
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What is my Prescribed Investor Rate (PIR)?
Your PIR refers to the rate at which your PIE tax is calculated.
To ensure you pay the right amount of tax on your investment we require your correct PIR and IRD number.
If you do not notify us of your correct PIR and IRD number or have not notified these details to us in the past, you will be automatically taxed at the default rate of 28%.
To contact OnePath, click here.
Please note, the New Zealand Inland Revenue has the ability to instruct OnePath to disregard your elected PIR and apply a different rate instead.
Individual investors
An individual investor’s PIR is based firstly on their taxable income and then on their combined taxable income and attributed PIE income earned in either of the previous two income years. Both requirements must be met to qualify for a PIR of less than 28%.
Taxable income includes gross salary and wages, interest and any other investment income that is taxable to the investor, but excludes attributed PIE income. From 1 April 2012, in determining their PIR, individuals who have become New Zealand tax resident in an income year must include their worldwide income in their 'taxable income'. For most but not all individuals, their income year will be the period 1 April to 31 March.
Joint investors
- Where your investment is held jointly, income is allocated to one investor only, referred to as the ‘Tax Payer’. If you both have the same PIRs, either investor can be selected as the Taxpayer. If you have different PIRs, the investor with the highest rate is required to be selected as the Taxpayer. If you do not notify us, the Taxpayer will be the first investor named on your account and income will be allocated to that investor at the default rate of 28%. Please provide the IRD number of the selected Taxpayer.
- If you have not ever notified us of your correct PIR and IRD number, you will be automatically taxed at the default rate of 28%.
- If your PIR has not changed for the previous income year, and your Taxpayer name and IRD number is correct, you do not need to do anything.
- It is not possible to recover any excess tax paid by the PIE on your behalf once the tax has been paid to Inland Revenue.
- You need to confirm your PIR each year, and before you withdraw, switch or transfer funds.
Companies
The PIR for New Zealand tax resident companies (including unit trusts) is 0%.
You are required to supply us with your IRD number.
Trusts
The PIR for New Zealand tax resident charities is 0%.
New Zealand tax resident superannuation funds and trustees of trusts (excluding charities and unit trusts) can notify as follows:
- You can select a PIR of 0%, 17.5% or 28%.
- New Zealand tax resident trustees of a testamentary (‘Will’) trust can also select a PIR of 10.5%.
When deciding your rate you will need to consider the different tax impacts for each, such as:
- If your PIR is 28%, you are not required to include the PIE income in your tax return, as this is final tax.
- If a PIR of less than 28% is selected, you are required to include the PIE income in your tax return and claim any PIE tax paid as a credit. However, if you select a 10.5% or a 17.5% PIR and the trust is attributed a loss, the loss cannot be included in the trust’s tax return.
You must supply your IRD number when you notify us of your PIR.
Partnerships
New Zealand tax resident partnerships need to elect the highest PIR of the partners, where all the partners are New Zealand tax resident individuals.
Partnerships can split the investments and advise the PIR and IRD number for each partner. If a partnership includes a New Zealand tax resident company or charitable trust, then the partnership investment must be split, as these entities have a PIR of 0%.
Non-residents
The PIR for non-New Zealand tax resident individuals, companies, partnerships or trusts is 28%.
Recent tax changes to non-resident PIRs
Two new categories of PIEs have been introduced which allow non-residents to be taxed at PIRs of less than 28%. The regime applies tax rates to non-residents reflecting the tax rates that would apply if the investment was direct. The new PIEs are known as foreign investment PIEs. The first category applies from 29 August 2011. The second category applies from 1 April 2012. The PIE provider must opt in to these PIEs for the new categories to apply. Currently, OnePath PIEs are not foreign investment PIEs. For more information on foreign investment PIEs, go to the IRD website at www.taxpolicy.ird.govt.nz
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What do I need to do?
You need to ensure your PIR is correct for the current tax year.
Things to remember
- If you do not notify us of your correct PIR and IRD number, or have not notified these details to us in the past, you will be automatically taxed at the default rate of 28%. Please note, if you provide us with a PIR of less than 28%, you must provide your IRD number.
- If your PIR has not changed, you do not need to do anything.
- It is not possible to recover any excess tax paid by the PIE on your behalf once the tax has been paid to Inland Revenue.
- Individuals cannot choose a PIR of 0%.
- You need to confirm your PIR each year, and before you withdraw, switch or transfer funds.
To contact OnePath, click here.
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Is your PIR correct?
Update your PIR
Update your PIR online here
This PIR update form is intended for individuals only; both your Investor Number and IRD number are required. Click here to download the manual form.
Click here for the joint investors PIR update form.
Click here for the companies, trusts and partnerships PIR update form.
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The benefits of PIEs
- If your personal income tax rate is higher than 28%, you will only pay tax on PIE taxable income at 28%.
- Attributed PIE income can be taxed at lower rates for some individual investors. In comparison, if they are investors in a superannuation scheme or a unit trust that did not elect to become a PIE, their returns will be taxed at a flat rate of 28%.
- PIEs investing in New Zealand and certain Australian shares are not taxed on any gains made when the fund sells these shares. Only the dividend income from these shares is taxable. However, losses are not deductible.
- By giving us your correct PIR and IRD Number, the tax deducted on your investment income will be a ‘final tax’ and will not need to be included in your tax return. However, trusts who have notified a PIR of less than 28% will have to include attributed PIE income in their tax return and claim any PIE tax paid as a credit. Where a trust has chosen a PIR of 10.5% or 17.5% and the trust is attributed a loss, the loss cannot be included in the trust’s tax return.
- Redemption gains or distributions received from PIEs are not separately taxable to investors and are not required to be included in your tax return.
- Provided you have notified your correct PIR, income earned from superannuation schemes and other locked-in funds, including KiwiSaver, will not affect your entitlements to family assistance (under Working for Families), student allowances, student loan repayment and child support obligations. However, income earned from other PIE funds may count towards certain other entitlements. We recommend you seek tax advice as to how this may affect you.
- It’s important to note that some of these benefits are not available from other forms of saving or investing, such as buying shares directly or investment property income.
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How to contact OnePath (NZ) Limited
- Telephone: 0800 737 575
- Email: service@onepath.co.nz
- Post: OnePath (NZ) Limited, Freepost 324, PO Box 7149, Wellesley St, Auckland 1141
- Click here to see full contact details for OnePath.
This webpage has been prepared for investors in investment funds managed by OnePath (NZ) Limited (“OnePath”). While care has been taken in the preparation of this information, OnePath gives no warranty as to the accuracy of the information and takes no responsibility for any errors or omissions. Individuals are encouraged to seek specialist tax advice on their own circumstances. This website is for information purposes only. Its content is intended to be of a general nature, does not take into account your financial situations or goals, and is not a personalised financial adviser service under the Financial Advisers Act 2008. It is recommended you seek advice from a financial adviser which takes into account your individual circumstances before you acquire a financial product. If you wish to consult an Authorised Financial Adviser, please contact us on 0800 737 575 and we will provide you with the contact details of an Authorised Financial Adviser in your area.