Summary of Investment Tax Changes
Taxation Changes
Changes to Resident Withholding Tax (RWT) and Portfolio Investment Entity (PIE) tax rates will take effect on 1 April 2010. This will align with changes to personal tax rates and the 30% company tax rate made last year.
You pay Resident Withholding Tax on interest you earn from bank accounts or other investments. The bank or investing organisation deducts this when they credit interest to your account.
RWT changes
Payments of interest to NZ resident investors are subject to withholding tax based on the RWT rates.
The new RWT rates for individuals that will be applied from 1 April 2010 are as follows:
| Marginal Income Tax Rates |
Present RWT Rates |
New RWT Rates
|
Thresholds
|
|
12.5%
|
19.5%
|
12.5%
|
$0 to $14,000
|
|
21%
|
19.5%
|
21%
|
$14,001 to $48,000
|
|
33%
|
33%
|
33%
|
$48,000 to $70,000
|
|
38%
|
39%
|
38%
|
$70,001 and above
|
No Witholding tax will be deducted where the investor has provided a certificate of exemption for RWT.
From 1 April 2010:
- The default RWT rate for individuals who do not provide their IRD number or elect another rate will be 38%.
- Individuals electing the 12.5% RWT rate need to consider if they have a reasonable expectation that their income will be $14,000 or less.
RWT rate for companies
From 1 April 2010 the RWT rate for companies will be 30%.
Prescribed Investor Rate (PIR changes)
If you have invested in or are considering investing in a certain type of portfolio investment entity (PIE) such as Spicers Premium Plus or KiwiSaver, then you will need to provide your IRD number and your prescribed investor rate (PIR) to the PIE.
From 1 April 2010
The new PIRs and income thresholds that will apply to individuals from 1 April 2010 are as follows:
| If your taxable income was: |
Your taxable income plus your PIE income/or less your loss was:
|
Your PIR is
|
| $14,000 or less; and |
$48,000 or less in either of the last two years |
12.5%
|
| $48,000 - $70,000 in both of the last two years |
21% |
| $14,001 - $48,000; and |
$0 - $70,000 in either of the last two years |
21% |
| $70,000 or more in both of the last two years |
30% |
| $48,001 or more in |
Both of the last two years |
30% |
| Non Resident |
|
30% |
PIRs for non charitable trusts
There have also been changes to the PIRs that can be used by non-charitable trusts to help trustees manage their provisional tax obligations.
From 1 April 2010 non-charitable trusts can elect a 0%, 21% or 30%. Non charitable testamentary trusts (for example settled under a will) can elect a 12.5% PIR. If the 0%, 12.5% or 21% PIR is elected the trust will be required to include in its tax return the PIE allocated taxable income and tax credits.
Trusts that have elected the 12.5% or 21% (or 19.5% prior to 1 April 2010) PIR can not include any PIE allocated tax loss in their tax return.
PIRs for charitable trusts
Effective from 1 April 2009 trustees of charitable trusts must be zero rated portfolio investors.
To find out about how these current tax changes could benefit you and how to access them, contact a local Spicers adviser today by clicking here to find one in your area.
You could also give us a call tollfree on 0800 777 802. We will be happy to answer any questions you may have.
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