10 Mar Don’t Set Your Cash on Fire – Check Your PIR Tax
Have you checked your KiwiSaver tax rate recently? If you’re on the wrong tax rate you may be overpaying or underpaying your tax.
Much like you pay tax on the wages or salary you earn; you also need to pay PIR (Prescribed Investor Rate) tax on any income you receive from KiwiSaver.
This means that if your KiwiSaver investment grows, you pay a portion of that growth in tax. Likewise, if your investment declines the IRD will pay you a portion of the loss.
KiwiSaver investments are managed funds called PIEs (Portfolio Investment Entities). Your KiwiSaver provider calculates this tax using the PIR which either you or the Inland Revenue have given them.
Your KiwiSaver PIR is based on your income from the last two financial years including any PIE income.
It is important to ensure your PIE has your correct PIR if your circumstances have changed, like if you have retired or taken leave from work. Inland Revenue may identify that your PIR is incorrect, and they may contact your KiwiSaver PIE to update your PIR without notifying you.
KiwiSaver Tax – Further Information
Total taxable income could be from salary, wages, interest, investment dividends and any other income. You may need to seek tax advice to understand what your PIR should be and what incomes are used in determining it.
One of the advantages of your KiwiSaver being managed by a PIE is that they have a top tax rate of 28% – so your usual income tax rate may be 39% but with PIE investments you automatically have a 5% discount on tax.
The Inland Revenue has even more information on KiwiSaver tax, click here for details.
Why Should You Care?
- If your PIR is too high, you might be paying too much tax … which you currently can’t claim back.
- If your PIR is too low, you may be faced with an unexpected tax bill from Inland Revenue.
If your PIR tax rate is wrong, you need to change it before 31 March 2021 so you’re not overpaying or underpaying.
When would my PIR charge?
Your KiwiSaver PIR is based on your income/s over the last two tax years, and it charges at the following events, making it important to keep your PIR correct:
- Withdrawal such as a first home or retirement withdrawal
- Making an investment fund change i.e. conservative to balanced
- End of the financial year 31/3
PIE tax accrues/builds up daily, so if it charges on one of the events, the accrued amount/balance returns to $0.
If your children have KiwiSaver, it may pay to also check their PIR tax rate.
How to Find Your PIR Tax Rate?
The first step to ensuring your PIR tax rate is correct is to find out what you’re currently being charged.
Your PIR is on your KiwiSaver statement but if you don’t have access to your most recent statement you can find it through the Inland Revenue’s website.
- Log in to Inland Revenue’s myIR
- Click on the KiwiSaver member link at the bottom right of the screen
- Click on View Your PIR at top right of screen
How to Work Out Your PIR Tax Rate
If you need, or want, to work out your PIR tax rate click on this IRD link.
How to Change Your PIR Tax Rate With Your PIE
Once you’ve worked out your PIR you should give it to your KiwiSaver provider (PIE fund). Email is best for this so you and they have a record of changes.
If you know who your KiwiSaver fund provider is, it’s easy. Below are the KiwiSaver providers we work with – click on the provider link below, login and follow the prompts.
Forgotten your login?
If you’re forgotten your login details the links above will take you to the provider’s login page where you can follow their prompts to be reminded of your username or password.
Don’t know your KiwiSaver provider?
If you don’t know which company manages your KiwiSaver, contact Inland Revenue on 0800 549 472 or by logging in to myIR.
Remember, you need to change your PIR tax rate before 31 March – any tax overcharged is currently non-refundable.
The advisers at Stratus don’t give tax advice so if you have any questions about tax you will need to contact Inland Revenue or your tax adviser.
For all your KiwiSaver questions, please contact email@example.com