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An investment in the Westpac Term PIE Fund (Term PIE Fund) works in a similar way to a Westpac term deposit, with the added advantage of having your investment income taxed at a lower rate if you're normally taxed at 30% or 33%. For some people on a 17.5.% or 10.5% income tax rate, the Term PIE Fund may also offer tax advantages.
Westpac Term PIE Fund rates
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> Who should invest in the Term PIE Fund?
> What sort of investment is the Term PIE Fund?
> Tax advantages of the Term PIE Fund
> A choice of return payments
> Comparisons between an investment in the Term PIE Fund
and a bank Term Deposit
> Managing your investment in the Term PIE Fund
> How to invest in the Term PIE Fund
> Registration of Westpac Term PIE Fund Prospectus
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| The Term PIE Fund may be a suitable investment option if you: |
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have a Prescribed Investor Rate (PIR) lower than your current income tax rate; or have taxable income under $48,000 and a) wish to earn additional income from a fixed term investment; or b) had a salary increase this income tax year and are now earning in the next income tax bracket. |
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are a New Zealand resident or New Zealand resident business |
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are looking for a low risk investment and want the certainty of knowing what your returns will be |
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have $5,000 or more to invest, |
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want to invest for 30 days to 3 years and are confident you will not need to make a withdrawal prior to the fixed term ending, and |
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want a competitive rate of return on your investment. |
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| The Term PIE Fund |
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is a unit trust* where investors acquire units at a fixed price of $1.00 each. The unit trust is registered as a Portfolio Investment Entity (PIE) for tax purposes. |
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is a low risk investment that invests solely in a New Zealand dollar, interest bearing account with Westpac NZ. |
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works in a similar way to a Westpac Term Deposit – investments are for a fixed term and fixed rate of return, with a choice of return payment options. |
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has returns taxed at your Prescribed Investor Rate (PIR) - up to 28%. (Term Deposits by comparison are subject to Resident Withholding Tax (RWT), with a maximum rate of 33%.) |
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may offer a range of investors the advantage of having their investment income taxed at a lower rate than a Term Deposit. |
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| * A unit trust is an investment vehicle that uses pooled money from investors to make investments. |
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| The Term PIE Fund offers tax advantages over a Term Deposit to some individual investors on a 10.5%, 17.5%, 30% or 33% income tax rate as well as certain trusts. (The income tax rate can also be referred to as the marginal tax rate for individual investors.) |
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Individual investors with an income tax rate of 30% or 33% - i.e. taxable income** over $48,000 p.a. and Trusts
As the Term PIE Fund pays tax on behalf of investors at a maximum rate of 28%, individual investors with an income tax rate of 30% or 33% will therefore save on tax. A trust with a 33% tax rate may notify a PIR of 28% and may also save tax. |
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Individual investors with an income tax rate of 10.5% or 17.5% - i.e. taxable income** under $48,000 p.a.
Due to the way your PIR is calculated, using your previous two years’ income and an allowance for extra PIE income, there are several situations were an investor can pay less tax on income earned from the Term PIE Fund than a Term Deposit.
a) Retirees who want to supplement their superannuation with income from a term investment.
Additional income can be earned up into the next tax bracket through the Term PIE Fund and be taxed at a lower rate than a Term Deposit.
This is more likely if your taxable income is near the upper limit of your income tax bracket (i.e. circa $13,000 or $47,000).
For example, if every year you earn around $47,000, you could increase your total income through a PIE up to $70,000 with the additional income taxed as if you were earning no more than $47,000. The PIE income that falls into the next tax bracket ($48,001 to 70,000) is all taxed at 17.5% compared to 30% if it came from a Term Deposit. This equates to a maximum available saving of $2,750 (12.5% x $21,999).
b) Investors who’ve had an increase in salary and are now earning in the next tax bracket.
Here, income from the Term PIE Fund would be taxed based on your lower income in either of the previous two income years. By comparison, tax on income received from a Term Deposit would be based on your higher income tax rate applicable this year.
For example, you return to full time work and your salary is now $48,001 - $70,000 (with an income tax rate of 30%) when it was previously $14,001 - $48,000 (with an income tax rate of 17.5%).
If you invested in the Term PIE Fund, returns would be taxed at the equivalent of your old salary’s income tax rate of 17.5% compared to 30% if you invested in a Term Deposit. Because PIE tax is based on your previous two years' income, you would enjoy a temporary tax advantage for up to two years. |
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The above examples and rates are based on current legislation, which is subject to change. A full statement of the tax advantages is set out in the registered prospectus of the Westpac Term PIE Fund.
Before investing in any term investment, we recommend you compare your PIR with your income tax rate to decide if you will be better off in the Term PIE Fund from a tax perspective. See How to invest in the Term PIE Fund below to determine your PIR and income tax rate.
** Examples of taxable income include salary, wages, commission, NZ Super, rent, interest and dividends, student allowances, parental leave, tips and gratuities. Taxable income does not include income from PIE compliant Kiwisaver schemes and managed funds, including the Westpac Term PIE Fund.
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| The Term PIE Fund offers you a range of rates of return with a choice of payment frequencies. |
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Returns paid at maturity – for terms less than 12 months returns are paid in full at the end of the term (unless the rate of return relates to a monthly income option). You can also elect to have returns paid at maturity for terms 12 months or longer. |
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Monthly income – for terms of six months or longer you can choose to have returns paid monthly into your nominated bank account. This regular income stream can be ideal if you need to supplement other income such as NZ Superannuation. |
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Compounding returns – for terms 12 months or longer, you can choose to have returns paid every three (quarterly), six or 12 months. The default payment frequency is quarterly. Returns can be compounded (added automatically to your original investment) which allows you to earn ‘returns on your returns’, meaning your investment grows at a faster rate than if returns were paid out during the course of the investment or paid in full at maturity. |
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Regular return payments – for terms 12 months or longer, you can choose to have returns paid into any New Zealand bank account every three (quarterly), six or 12 months. The default payment frequency is quarterly. This allows you to receive a periodic income stream that is less frequent than our monthly income option. |
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| Please see our rates page for the latest rates available for each payment option.
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| Fixed rate |
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| Fixed term |
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| Choice of return payment options, including monthly income and compounding returns |
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| Investment type |
Direct investment into an interest bearing account with Westpac NZ |
Investment in a unit trust that invests solely in a New Zealand dollar, interest bearing account with Westpac NZ |
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| Minimum investment |
$5,000 |
$5,000 |
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| Applicable tax |
RWT
Current maximum rate 33% |
PIE Tax
Current maximum rate 28% |
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| Break or withdrawal fee |
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When setting up your investment, you can choose to have your investment (plus returns) reinvested for the same or another term or paid into any New Zealand bank account when it matures. You can also change your maturity instructions anytime up to and on the day of maturity.
Investor Communications |
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When you invest or reinvest, you get a certificate that records everything about your investment, including your reinvestment or repayment instructions. |
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If you choose to have your returns compounded or paid out to your bank account, you’ll also receive return payment notices with details of each payment. |
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Prior to your investment maturing, we’ll send you a reminder notice so you can review your reinvestment or repayment options and make any changes before it matures. |
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If you’re invested in the Term PIE Fund on 31 March of any year, you’ll also receive an end of tax year return payment which can be reinvested or paid to your bank account. Investors in the Term PIE Fund on this date also receive a copy of the Term PIE Fund Annual Report containing the Term PIE Fund’s audited financial statements. |
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At the end of the tax year, you’ll also receive a tax certificate. |
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You can also view details of your investment in the Term PIE Fund, including your maturity instructions through Westpac’s Online Banking. |
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Reviewing your PIR
We recommend you review your PIR each year and ensure your correct PIR has been notified to us.
If you advise the wrong PIR, you may be obliged to pay any tax shortfall at your income tax rate, plus any interest and penalties, and may be required to file a tax return. Similarly, any excess tax paid on your behalf cannot be claimed back as PIE tax is a final tax.
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Early Withdrawals
Choosing a term investment means you’re willing to keep your money invested for a set time. Money can only be taken out prior to maturity in exceptional circumstances as agreed by Westpac. If you find yourself in this position, you’ll need to talk to us about your options as approved early withdrawals are charged an early withdrawal fee (refer to the Investment Statement for details).
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| Visit a Westpac branch to invest in the Term PIE Fund. You will need to provide |
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a current form of identification e.g. NZ driver's licence or passport |
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your IRD number |
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your Prescribed Investor Rate (PIR) |
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| If you’re an existing Westpac Term Deposit customer or Term PIE Fund investor, you can also invest by calling us on 0800 400 600.
Prior to investing you will need to have received and read the latest investment statement. |
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find your nearest Westpac branch |
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more info about Prescribed Investor Rate |
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more info about your Income Tax Rate |
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| BT Funds Management (NZ) Limited has registered a prospectus for the offer of units in the Westpac Term PIE Fund. You can download a copy of the prospectus at www.companies.govt.nz (search their register for 'BT Funds Management (NZ) Limited'). |
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