Your KiwiSaver and some other investments may be liable to PIE Tax. A PIE is a Portfolio Investment Entity. PIE Tax calculations are quite complicated – the important thing that you need to know is that PIE tax is FULL AND FINAL.
Your PIE tax rate is your PIR (Prescribed Investor Rate). This is different to your Marginal Tax Rate – which is based on your earned income. For more information on how to calculate your PIR (the rules are not straight forward) can be found here. https://www.ird.govt.nz/roles/portfolio-investment-entities/using-prescribed-investor-rates
What this means is that it is important that you provide the correct PIR Tax Rate to your KiwiSaver provider and any institution that you have PIE investments with. If your PIR rate is too low, IRD will require you to pay the additional tax owing, potentially with penalties. The 2019 financial year was the first time that IRD had the capability to check this and send many letters to people who had the wrong PIR rate.
If your PIR rate is too high, you will overpay your tax, and you cannot get that tax back.
NOTE: Individuals investing in PIE funds usually don’t need to include any PIE income on their tax returns (note that the situation may differ for trusts and companies). However, we recommend that you seek expert tax advice about including PIE income on your tax return if your PIR was not correct during the tax year.
Distributions paid out by PIE funds are not taxed. Most investors will pay their PIE tax after the end of the tax year (31 March), in April. However, PIE tax is also payable when an investor sells or transfers all or part of their holdings, or if the fund closes down – this is called “crystallising” the PIE tax.