If you have invested in or are considering investing in a certain type of portfolio investment entity (PIE) such as a KiwiSaver scheme, then you will need a prescribed investor rate (PIR) to give to the PIE along with your IRD number.
There are several different types of PIE and not all of them require investors to provide a PIR. If you aren't sure whether the PIE you have invested in or are considering investing in requires a PIR, then you should contact them to clarify this.
The only time you will need a PIR is when investing in a type of PIE known as a multi-rate PIE (MRP).
We can't advise you about investment schemes. For advice or assistance about your investments you should talk to your tax agent or financial adviser.
What is a prescribed investor rate (PIR)?
A PIR is:
- the tax rate that the MRP you invest in can use to calculate the tax on the income it derives from investing your contributions, if you have also provided your IRD number
- based on your taxable income, eg income from salary, wages and any additional sources of income that you would include in your income tax return.
The attributed income from the MRP you invest in will also be taken into account.
As an investor you may be required to give your PIR to the PIE you invest in.
Why do you need a PIR?
Changes to the taxation of investment income enables managed funds that become MRPs to calculate their tax based on each investor's PIR. Before the changes the funds paid tax at 33%. This can now be reduced to 10.5% for investors that qualify for the lower rate - see Make sure you're using the correct prescribed investor rate (PIR) . To benefit from these changes, investors will need to give their PIR and IRD number to their MRP .
Your PIR and your MRP
When do you give your PIR to the MRP?
The MRP should tell you the date that they need your PIR and IRD number by. They should ask you for it before the start of the income year. The deadline can vary based on your balance date and your MRP's balance date. You need to use your last two income years that end before the start of the MRP's income year.
An investor with a standard balance date of March whose MRP also has a March balance date uses the two years before the commencement of the income year the rate is to be applied to. For the 2012 income year they use the details for their income years ending 31 March 2010 and 31 March 2011.
You can still provide your PIR and IRD number during the tax year. Provided the MRP has not performed its tax calculation for the period (quarter or annual), it may be able to adjust for the correct amount of tax.
How do you give your PIR to the MRP?
The MRP will tell you how to send it to them.
When do you have to update your PIR?
After the first time you give your PIR and IRD number to the MRP, you should review your PIR annually before the beginning of the MRP income year which generally will be 1 April.
However you only need to tell the MRP if your rate changes. If it does change you should give the MRP your new PIR before the start of the MRP's income year.
Your MRP's balance dates
These will be on the investor statement that the PIE sends you. Otherwise you may need to ask the PIE.
Most but not all MRPs have a 31 March balance date. If you as an investor have a different balance date to the PIE it may affect the income years you take into account in working out your PIR. See Prescribed investor rate examples for more information.
Confirmation that the MRP has received your PIR
The MRP may not send confirmation of the PIR they have applied to your investment. If in doubt you should contact them.
Receiving information from your PIE about your PIE income
Generally PIEs need to send you the information by 30 June following their tax year.
PIEs that file quarterly, and zero-rate their exiting investors need to provide the information within one month of the end of the quarter in which the investor exited.
If the MRP doesn't use the rate you give them
If the MRP has not applied the PIR you gave them, then you should contact them as soon as possible to correct the situation.
Provided the MRP has not performed its tax calculation for the period (quarter or annual), it may be able to adjust for the correct amount of tax.
PIEs listed on the stock exchange and PIRs
Listed PIEs calculate tax at the company tax rate and do not calculate tax based on the PIR advised by its investors.
If your PIE doesn't want to know your PIR
The PIE in which you invest may be a:
- listed PIE, or
- benefit fund PIE which does not attribute income it earns to investors so cannot calculate tax based on the PIR of its investors, or
- certain life fund PIEs.
We can't advise you about investment schemes but can give you advice of a general nature. You can phone us on one of the numbers below. You can call between 8am to 8pm Monday to Friday, and 9am to 1pm Saturday.
|Calling within New Zealand||0800 227 774|
|Calling from overseas||+64 4 978 0779|
|Calling from cellphone||04 978 0738|
Date published: 21 Sep 2010