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General questions and answers about the tax treatment of PIE funds.
Investors should note that the information below is of a general nature and is not tax advice. Please refer to the relevant Investment Statement for the taxation summary of that particular fund. We recommend you seek professional tax advice on how the PIE tax regime affects your individual circumstances. |
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| > What is a PIE fund? |
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| > Have all Westpac managed funds elected to become PIE funds? |
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| > What is the tax treatment of NZ and Australian share investments within a PIE fund? |
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| > What is generally the tax treatment of overseas share investments within managed funds? |
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| > What about other asset classes such as cash and fixed interest? |
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| > How and when is PIE tax calculated and paid to the IRD? |
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| > How is an investor's PIE tax liability deducted? |
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| > How is an investor’s PIE tax liability calculated? |
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| > What happens when an investor withdraws from a PIE fund? |
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| > What are the PIE tax implications if an investor wants to transfer ownership of the investment? |
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| > How will an investor know how much PIE tax has been paid? |
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| > Where can investors go for more advice? |
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| > What is a PIR? |
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| > How does an investor determine their correct PIR? |
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| > What PIR applies to an investor who has been unemployed for the last six months? |
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| > Why do investors have to supply their PIR and IRD number? What happens if investors do not provide these? |
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| > What happens if an investor supplies an incorrect PIR? |
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| > How do investors update PIR's? |
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| > Are investors required to file a tax return? |
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| Tax rebates FAQs |
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| > What is a PIE tax rebate? |
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| > When does an investor with a 0% PIR realise a tax rebate? |
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| > How do investors receive PIE tax rebate due to them? |
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| What is a PIE fund? |
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| PIE stands for Portfolio Investment Entity. A managed fund may elect to become a PIE fund if it meets the eligibility requirements of the PIE tax regime. |
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| Generally, non-PIE funds are taxed at 30%, regardless of an investor’s marginal tax rate. However PIE funds attribute investment income to the investors and calculate tax on the basis of the investors’ Prescribed Investors Rate or PIR which is capped at 30%. |
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| Have all Westpac managed funds elected to become PIE funds? |
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| Yes. All Westpac managed funds have elected to become PIE funds. |
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| What is the tax treatment of NZ and Australian share investments within a PIE fund? |
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| A PIE fund is not subject to any tax on capital gains on any share investments it holds in New Zealand resident companies or Australian resident companies listed on an approved Australian Stock Exchange (ASX) index, that maintain a franking credit account. A PIE fund is taxable on any dividend income received on the share investments previously referred to. This gives investors in a PIE fund the same tax treatment on New Zealand and Australian listed shares as generally applies for direct investors. |
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| What is generally the tax treatment of overseas share investments within managed funds? |
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| Most investment in overseas shares by a managed fund are taxed under the Fair Dividend Rate (FDR) method, although there are certain exceptions (for example, shares in Australian resident companies referred to in the question above). |
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| Under the FDR method, a managed fund will generally be treated as deriving taxable income equal to 5% of the daily average market value of the relevant overseas share investments. Any dividends or profits from the sale of such share investments, are ignored under the FDR method and no tax deduction for any losses in respect of such share investments may be claimed. |
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| What about other asset classes such as cash and fixed interest? |
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| Generally, fixed interest products (such as NZ and overseas bonds), cash and foreign exchange hedging contracts continue to be taxed on their capital gains and income. |
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| How and when is PIE tax calculated and paid to the IRD? |
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| PIE funds generally calculate PIE tax on a daily basis (or weekly in some cases) and pay PIE tax at the end of each tax year (31 March) on the investors’ behalf at the PIR notified by investors. |
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| If an investor makes a full or partial withdrawal from a PIE fund during the year (such as a redemption, transfer or switch), the amount of the PIE tax attributable to the investor will generally be deducted from the withdrawal proceeds and will be paid to the IRD. |
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| How is an investor's PIE tax liability deducted? |
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| Generally a PIE fund can cancel an investor’s units to meet the investor’s PIE tax liability. This will occur when there are full or partial withdrawals during a year, when the proceeds from the withdrawals are not enough to cover the tax obligation, at the end of the tax year. However, doing this means that investors do not have to include the income in a tax return. |
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| For investors that have elected a 0% PIR, units will not be cancelled as the PIE fund will not pay tax on behalf of the investor. The investor will need to include the income in their tax return. |
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| How is an investor’s PIE tax liability calculated? |
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| Each day, the total taxable income and deductible expenses of the PIE fund, and any associated tax credits received, are allocated to investors based on the proportion of units that each investor holds. |
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| Each investor’s share of the net taxable investment income less any other deductible expenses charged for ongoing management and administration is multiplied by each investor’s PIR to get the PIE tax liability amount. Each investor’s share of any available tax credits is then used to reduce the tax liability. |
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| If an investor has elected a 0% PIR, the investor should receive information on any income, expenses and tax credits for inclusion in their personal tax return from the manager of the fund. |
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| What happens when an investor withdraws from a PIE fund? |
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| Full withdrawals will be paid to the investor after deducting any applicable PIE tax. No further tax will be payable by the investor, unless the investor has advised of a lower PIR than they are entitled to. |
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| For investors that have elected a 0% PIR, full withdrawals will be paid gross of any applicable PIE tax. The investor will need to include the income in a tax return and tax may be payable by the investors. |
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| A partial withdrawal of funds will generally be grossed up to include any applicable PIE tax. For example, if an investor requests a $10,000 partial withdrawal, PIE tax will be calculated on that figure and the amount of the withdrawal will be deemed to be for $10,000 plus applicable PIE tax. |
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| If an investor changes their PIR following a withdrawal, the new PIR will only apply to the income that may be taxed on any subsequent partial withdrawals. |
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| What are the PIE tax implications if an investor wants to transfer ownership of the investment? |
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| An investor who transfers units to another party will have PIE tax deducted. |
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| The transfer of ownership is treated as a withdrawal by the original investor, so PIE tax is payable on the transfer and the balance received by the new investor, will be after the PIE tax has been deducted. |
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| How will an investor know how much PIE tax has been paid? |
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| All investors will receive an end of year investor tax certificate after 31 March each year. |
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| Where can investors go for more advice? |
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| Westpac is not in the business of providing tax advice and the information provided is based on our understanding of the current tax legislation and our response to it. |
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| We strongly recommend investors speak to a tax professional to determine how the changes to the tax legislation impact their specific investments and what action they should take. |
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| What is a PIR? |
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| PIE funds allow the calculation of tax on income earned from a PIE fund to be based on each investor’s PIR (currently 0%, 12.5%, 21% and 30%). |
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| A personal marginal tax rate is the rate that applies to a person's last dollar of taxable income earned. The current personal marginal tax rates are 12.5%, 21%, 33%, or 38%. Therefore an investor's PIR may differ from their marginal tax rate. |
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| How does an investor determine their correct PIR? |
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| Please use the following table to determine your PIR from 1 April 2010. |
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| Resident individual or joint investor* |
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in either of the last two income years, your: taxable income was $14,000 or less (excluding PIE income); and total taxable income (non PIE and net PIE income) was $48,000 or less |
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12.5%** |
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in either of the last two income years, your: taxable income was less than $48,000 (excluding PIE income); and total taxable income (non PIE and net PIE income) was less than $70,000 |
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21%*** |
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in all other cases |
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30% |
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| Trustee of a trust (but not a unit trust or charitable trust) and super funds |
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Either 0%, 12.5%**, 21%*** or 30%.
You can choose one to best suit your beneficiaries |
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| Company, incorporated society, charitable trust, unit trust, PIE/PIP or non profit organisation |
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0% |
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| Non New Zealand tax resident |
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30% |
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| Notes |
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| *If an investment is jointly owned, generally the highest PIR notified by the investors will be applied. Both investors must provide their PIRs and IRD numbers or the highest PIR (currently 30%) will be applied. |
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| **Only certain testamentary trusts may elect a 12.5% rate. |
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| ***Investors with a recorded PIR of 19.5% will automatically move to 21% on 1 April 2010, unless the investor notifies that another PIR should apply. |
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| For further information on PIRs and general tax queries, visit the IRD website or contact them on 0800 227 774. |
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| What PIR applies to an investor who has been unemployed for the last six months? |
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| PIRs are based on income earned in either the two previous income years, not on income earned in the current year. This also applies to those on parental leave. |
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| Why do investors have to supply their PIR and IRD number? What happens if investors do not provide this? |
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| If an investor does not supply their PIR and IRD number, a default PIR of 30% will be applied. |
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| This may not be in the best interests of an investor if the investor is eligible to apply a 19.5% PIR. |
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| What happens if an investor supplies an incorrect PIR? |
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| If an investor advises a lower PIR than entitled, the investor may be obliged to pay any tax shortfall (plus any interest and penalties) and file a tax return. |
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| If a higher PIR is notified, any excess tax already paid on behalf of the investor can generally not be claimed back as PIE tax is a final tax. |
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| How do investors update PIR's? |
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| An investor can update their PIR at any time during the year. Investors should review their PIR each year to ensure it remains correct. Subject to any tax legislation, the last recorded PIR will continue to be used until such time as a change is notified by the investor. |
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| Investors can update their PIR by contacting us: |
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Westpac KiwiSaver Scheme members |
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0508 WPAC KIWI (0508 972 254) or |
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+64 9 367 3317 (if calling from outside New Zealand).
(Monday to Friday 8.30am and 5.30pm) |
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Westpac Term PIE Fund investors |
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Visit your nearest Westpac branch |
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Other Westpac managed fund investors |
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0800 738 641 or |
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+64 3 372 4855 (if calling from outside New Zealand)
(Monday to Friday 8.00am and 5.30pm) |
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| Are investors required to file a tax return? |
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| The PIE tax regime has been designed so most investors will not be required to file a tax return for their PIE income. PIE tax is generally a final tax for investors unless they have advised a lower PIR than is applicable or have elected to apply a 0% PIR. |
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| PIE tax related to an investor’s share of taxable income in a PIE fund, and investor information including the applied PIR, will be passed onto the IRD. |
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| If an investor’s PIR is incorrect, the IRD may contact the investor directly, especially where a lower PIR has been incorrectly applied. In this case, an investor may be required to file a tax return and pay any tax shortfall (together with any interest and penalties). |
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| What is a PIE tax rebate? |
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| A PIE tax rebate is a tax refund from the IRD to the PIE fund on behalf of investors. Rebates may occur when investment income (which excludes capital losses) has been negative (such as declined markets), deductible expenses exceed taxable income, or where a PIE fund has allocated more tax credits to an investor than the investor’s PIE tax liability. |
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| When does an investor with a 0% PIR realise a tax rebate? |
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| Investors with a 0% PIR will generally include any allocated PIE tax loss or claim the benefit of any additional tax credits through their tax return. |
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| If a rebate is due, investors should claim this directly from the IRD. We recommend such investors seek advice from a tax professional or the IRD. |
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| How do investors receive PIE tax rebates due to them? |
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| Investors that continue to have an investment in a Westpac managed fund will receive additional units in the relevant fund, as payment of their share of a PIE tax rebate, shortly after the IRD pays the rebate to the fund. |
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| For investors who fully withdraw from a Westpac managed fund throughout the year, the amount of the rebate will either be credited to the investors’ last nominated bank account or sent to the investors’ by cheque, shortly after the IRD pays the rebate to the fund. |
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| Where can investors go for more advice? |
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| Every investor has a different personal financial position and individual portfolio of investments, which may or may not be restricted to your Westpac investments. |
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| Therefore, we strongly recommend you seek the advice and expertise of an independent tax adviser or the IRD if you have any queries or concerns regarding your PIR or tax obligations on any of your investments. |
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