How PIE income can affect your tax liability

There may be tax implications if you:

• withdraw all or part of your investment
• change the class of the investment, or
• gift the investment.

Withdrawing all of your investment

Certain PIEs have the option of paying the tax relating to the income for the period in which the withdrawal or exit occurs, on the investor's behalf. Other PIEs that are unable to calculate the tax can zero rate the income for the period.

Withdrawing part of your investment

Certain PIEs can pay the tax for the period in which an investor withdraws their investment. If the tax calculation has been made at the correct PIR or 19.5% or 30% and is sufficient to meet the tax liability, the income does not have to be included in an investor's tax return. Income taxed at a zero rate will be included in the investor's tax return.

Paying the tax on investment withdrawals

This depends on the type of PIE that an investor has invested in, but generally the PIE will deduct the tax before returning the funds. However, certain PIEs are not able to calculate the tax during a quarter. In this case the income for that quarter may need to be included in the investor's income tax return.

Changing the class of your investment

If an investor withdraws from a portfolio investor class and reinvests the funds in another portfolio investor class of the same PIE, then the PIE can treat the change of class as a partial withdrawal and calculate tax at that time.

Gifting your investments

*Gift duty may also be payable.

Date published: 29 Jul 2008

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