Deducting RWT (resident withholding tax) from interest
Generally, you must deduct RWT from all the interest your business pays out to your investors that is resident passive income.
Exception: You do not need to deduct RWT from interest your business pays to any investor who holds a certificate of exemption from RWT (see Tax deducted from interest and dividends for details.)
Registration as a payer
If investors other than banks or other financial institutions have money invested in your business or organisation, and your business pays more than $5,000 interest a year to these investors, you will need to register as a payer of RWT.
Due dates for payment
Once you have deducted the RWT you must send it to us. How often you have to send it in depends on the total amount of RWT that you deduct.
| Amount | Action |
|---|---|
| More than $500 in one month | If you deduct RWT of $500 or more each month, you must pay the deductions made in each month by the 20th of the following month. |
| Less than $500 |
|
Information you must give to the people you pay interest to
You must supply a deduction certificate to each recipient you have paid interest to with RWT deducted.
You can choose the format of the certificate. You can use:
- an Inland Revenue Resident withholding tax deduction certificate (IR15)
- an alternative paper form, or
- an electronic format.
You are required to show certain information on the certificate, which you can find in the Resident withholding tax (RWT) on interest - payer's guide (IR283). In addition to this information, to reduce queries from recipients, we recommend you include details as set out in the Commissioner's statement about requesting a personal tax summary. There are two versions of the statement you can use.
Note
The following examples are using the tax rates for the year ending 31 March 2010.
Short version for the year ending 31 March 2010
"If your only income is from employment, interest and dividends, you are required to request a personal tax summary if your interest is over $200 and:
- your total income is between $48,000 and $70,000 and your interest is taxed at less than 33%, or
- your total income is over $70,000 and your interest is taxed at less than 38%.
Please contact Inland Revenue to update your interest details and to request a personal tax summary."
Long version for the year ending 31 March 2010
"If your only income is from employment, interest and dividends, you are required to request a personal tax summary if you earned over $200 interest and:
- you have a student loan and earned over the student loan repayment threshold
- you pay child support
- your total income is over $48,000 and either:
- some interest has been taxed at 19.5% or less, or
- your average rate is less than 33%
- your total income is over $70,000 and either:
- some interest has been taxed at 33% or less, or
- your average rate is less than 38%.
Please phone Inland Revenue to update your interest and RWT details, and to request a personal tax summary."
Note:We suggest you provide the amount of the student loan threshold that applies for the year on the long version of the statement.
Read our Resident withholding tax (RWT) on interest - payer's guide (IR283) for more information.
RWT on dividends differs in some ways from RWT on interest. See Deducting RWT from dividends for more information.
Date published: 24 Mar 2009
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