At PMG, we want our investors to get the most value from their investments over the long term. Our retail funds are structured as multi-rate Portfolio Investment Entities, or PIEs, which can offer some advantages in terms of the tax investors pay on their investment income.
PIE tax was introduced in New Zealand in 2007, providing investors with a standard tax structure across their investments to simplify their tax returns. When investing in a multi-rate PIE fund, you select a Prescribed Investor Rate (or PIR) that matches your income based on IRD criteria, and the fund does your tax heavy lifting by calculating and paying the tax to the IRD on your behalf.
How are PIE funds taxed?
Investors in multi-rate PIEs are taxed on their share of the funds’ taxable income, rather than having a tax liability on distributions, like certain other investments.
The tax you pay on income derived from a PIE fund (your share of PIE tax) is calculated based on your notified Prescribed Investor Rate, which is capped at a maximum of 28 per cent. This means you could end up paying less tax than you would on a non-PIE investment, which has a tax rate of up to 39%.
Over the long term, the benefit of these tax savings can compound and investors stand to gain a bigger advantage over time.
Do I need to include PIE income in my income tax return?
PIE tax is generally a ‘final’ tax. This means you don’t have to include your PIE taxable income in your income tax return – as long as you’ve provided the correct PIR.
If you’ve provided the correct PIR, your PIE tax liability (either at the end of the year or at the time of a taxable event like a withdrawal) will be taken care of.
Adjustments in the tax system over the last few years have amplified the appeal of PIE-structured investments for numerous investors. However, this does not take individual circumstances into account. We always recommend investors seek professional advice from a registered Financial Adviser or accountant before making any investment decisions.
Learn more about our retail funds and portfolio here.
Disclaimer: The information in this blog is of a general nature and was current as of April 2024. It is not intended to be regulated financial advice for the purpose of the Financial Markets Conduct Act 2013 and does not take your individual circumstances and financial situation into account. PMG does not provide financial advice. Please seek advice from a licenced financial advice provider before making any investment decisions.
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