Tax is one of life’s certainties, and it is part of KiwiSaver too.
It’s good to know how the taxation works on your contributions and investment earnings. The good news is that withdrawals are currently tax free.
Let’s start with your contributions. Remember, for employees these are calculated on your gross salary and wages and are paid from your after-tax income through your normal payroll.
Employer contributions are subject to Employer Superannuation Contribution Tax (ESCT), which is deducted from the employer contributions before they are passed to your KiwiSaver scheme. The current ESCT rates are:
|Income (including gross employer contributions)||Rate|
|Less than $16,800||10.5%|
|Between $16,801 and $57,600||17.5%|
|Between $57,601 and $84,000||30%|
|$84,001 and over||33%|
The Summer KiwiSaver scheme is a type of Portfolio Investment Entity (PIE) known as a multi-rate PIE. A share of the PIE’s taxable income (or loss) per fund is allocated to you based on your interest in the fund. The scheme pays tax on your share of this income. The amount of tax you pay in respect of a PIE is based on your prescribed investor rate (PIR). This can be 10.5%, 17.5% or 28%.
Make sure you tell us what rate to apply to your account, if you don’t tell us the default rate of 28% will apply.
Make sure you tell us if your situation changes and you need to swap to a different PIR. If the advised PIR is lower than your correct PIR, you will need to complete a personal tax return and pay any tax shortfall, interest and penalties. If the advised PIR is higher than your correct PIR, then for the 2020/21 and future income years any overpayment of PIE tax may reduce your income tax liability for that income year and may give rise to a tax refund.
Changing your PIR is easy, you can update it online via your profile.
The Inland Revenue may also instruct us to update the PIR on your Summer KiwiSaver scheme account if their records indicate a change is required. We are obliged to apply this PIR to your account and will send you a confirmation that this has occurred. We will apply this PIR unless you subsequently notify us of a different PIR.
If you are a tax resident of New Zealand work out your PIR using the table below or by completing the questions, based on your income for the past two years.
If you are not a New Zealand tax resident your PIR is 28%.
|Taxable income (In EITHER of the last two income years)||Taxable income plus Portfolio Investment Entity (PIE) income (In EITHER of the last two income years)||PIR|
|$14,000 or less||$48,000 or less||10.5%|
|$48,000 or less||$70,000 or less||17.5%|
|All other cases||28%|
Your tax advisor can help you work out your PIR or visit the Inland Revenue website.