Your allocated income from the PIE and your tax return

When to complete a tax return if you derive taxable income allocated by a PIE

If you already complete an IR6 return, you will continue to do so by the usual return filing dates*.

If the resident trustee receives allocated income from their PIE that is ...	then ...	and ...
not excluded income	you as trustee must file an IR6 tax return including the allocated income along with any other income the trustee derives by the usual return filing dates*.	you may have additional tax to pay depending on other income or loss and tax credits the trustee may have. The PIE will advise the trustee what is required in the investor statement it sends. Note you may only claim a loss where the zero rate has been applied.
excluded income	you will not need to include the allocated income in the trust's tax return.

*Unless you have an extension of time to file a tax return, filing dates are:

• the 7th of the fourth month after balance date for taxpayers with a late balance date (ie 1 April to 30 September), or
• the 7th July following the end of the tax year for all other taxpayers.

What goes in your tax return if you have allocated income from the PIE

If you have chosen the 30% PIR, the allocated income from the PIE will not be included in the trust's tax return.

There are five situations where allocated income from the PIE must be included in the trust's tax return.

1. Resident trustee has chosen a PIR of 0%

The allocated income must be included in the trust's return, and:

• allocated income is taxed either as trustee or beneficiaries' income, and
• allocated losses remain with the trustees, and
• allocated tax credits are subject to the standard credit treatment for each type of credit.

2. Resident trustee has chosen a PIR of 19.5%

The allocated income is included in the trust's return and is taxed either as trustee or beneficiaries' income. The PIE tax paid at 19.5% is available as a tax credit.

The allocated loss and tax credit is not included in the trust's return as the PIE has already provided credit value for the loss at 19.5%.

3. Trustees do not notify a PIR and/or their IRD number

The allocated income and PIE tax paid at 30% goes in the trust's return, and is treated either as trustee or beneficiaries' income.

The allocated loss and allocated tax credits must also go in the trust's return as trustee income.

Note that if the PIE has already provided credit value for the loss and tax credits you should contact our Large Enterprises Assistance desk for further information - see "Contact us".

4. Trust withdraws its investment from a PIE that zero rates the income for a quarter

You must include the allocated income in the trust's tax return and pay tax based on the trustee's or beneficiaries' basic tax rates. Any allocated tax credits will also be included in the return. 

You must include the allocated loss and allocated tax credits in the trust's return as trustee income.

5. PIE is listed on the New Zealand stock exchange and is not a portfolio tax rate entity

As a New Zealand resident trustee you can choose whether or not to include the dividends in the trust's tax return.

 

Treating the allocated income from the PIE as beneficiary income

For trustees investing in a PIE, the usual income allocation rules apply.

If you as a resident trustee choose a PIR of ...	then the allocated income from the PIE ...	and ...
0% or 19.5%	where it is vested or paid to the beneficiary as beneficiary income, must be included in the beneficiary's income tax return	you must pay tax on behalf of the beneficiary for income allocated to that beneficiary.
30%	is excluded income and does not need to be included in either the trustee's or beneficiaries' taxable income in their tax returns.

 

 

Tax credits in excess of the tax liability

Where the PIE calculates tax credits in excess of the tax it has to pay on the trust's allocated income/loss, the PIE will either:

• adjust the investor's portfolio investor interest
• make a distribution, or
• reduce the amount of payment required from you.

This does not apply to zero-rated investors. The income/loss and tax credits flow through to the trust return with any excess tax credits forming part of the trust's overall tax position.

Failure to provide a PIR to the PIE will result in the PIE applying the default rate of 30%. However the trust should still be treated as a zero-rated investor and will not be entitled to an adjustment for any excess tax credits.

When your allocated income from the PIE is treated as being derived

If the trust has a balance date other than 31 March, the allocated income from the PIE is treated as being received in the income year which includes the end of the PIE's income year. See the following examples.

If the trust has a ...	and ...	then ...
30 June 2009 balance date which is your 2009 income year	the PIE you invest in has a 31 March 2009 balance date	as the end of the PIE's 2009 income year falls within the trust's 2009 income year, their 2009 income is also the trust's 2009 allocated income.
31 December 2008 balance date, which is your 2009 income year	the PIE you invest in has a 31 March 2009 balance date	as the end of the PIE's 2009 income year falls after the end of the trust's 2009 income year, their 2009 income falls into the trust's 2010 income year.

PIE income and foreign tax credits

For resident trustees who choose the 0% PIR or default to the 30% rate, foreign tax credits available will generally be the lesser of:

• the amount of the allocated credits, and
• the amount calculated by multiplying the allocated income by the trust's tax rate.

The foreign tax credits can be claimed in the trust tax return up to the amount of the tax you are required to pay on the income allocated by the PTRE.

For resident trustees who choose the 19.5% or 30% PIR foreign tax credits are taken into account by the PTRE when it calculates its tax liability.

PIE income and New Zealand tax credits

For resident trustees who choose the 0% PIR or default to the 30% rate, the amount of the allocated New Zealand tax credits flow directly to the trust.

For resident trustees who choose the 30% PIR, New Zealand tax credits are taken into account by the PTRE, after allowing foreign tax credits, when it calculates its tax liability.

For resident trustees who choose the 19.5% PIR, New Zealand tax credits are used by the PIE to cover it s tax liability on your allocated income.

In the trust's tax return you can record the PIE tax at19.5% as a credit in relation to the allocated income in the overseas income and tax credit panels.

Excess New Zealand tax credits and losses

Where the resident trustee chooses a PIR of 19.5% or 30%, most PTREs that have excess New Zealand tax credits or losses in a tax calculation period receive a tax credit calculated at the investor's PIR.

The PTRE then allocates the credit to the investor by adjusting their investor's interest in the PTRE, or making a distribution to the investor.

For resident trustees that have chosen 19.5% PIR, allocated losses and tax paid/credit details do not go in the trust's tax return.

Allocated income from the PIE and provisional tax

If the trustee's notified PIR is ...	and ...	then ...
30%	the allocated income from the PIE is excluded income	there may be a reduction in the provisional tax liability depending on provisional tax method chosen by the trustee.
19.5%	the allocated income is not excluded income	exposure to a provisional tax liability may be cleared or reduced.
0%		exposure to a provisional tax liability may be increased.*

* Previously distributions from the trust's collective investment vehicle (CIV) might have attached credits that could be used against the trustee's income tax liability. Under the PIE rules those credits may no longer be available. See the example below.

 

Date published: 10 Nov 2009

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