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You pay tax on interest and dividends you earn from bank accounts and investments you have in New Zealand. You also pay tax on income from overseas accounts and investments. The payer of interest or dividends will withhold tax before making the payment to you. This is called resident withholding tax (RWT).

Your payer (bank or fund manager), deducts RWT from your interest or dividend payment before they pay you.

How much tax do I pay?

The amount of  RWT your payer deducts depends on your tax status, the type of interest or dividends you earn, and the information you give your payer. For example:

  • interest payments from a savings account or term deposit to an individual are taxed at a RWT rate that the recipient chooses, depending on their income. If you do not choose a rate, then the default rate of 33% applies.
  • dividends and unit trust distributions are all taxed at a RWT rate of 33%, while portfolio investment entities (PIEs) are taxed at different rates depending on the type of fund
  • interest payments are taxed at the non-declaration rate if you have not given your IRD number to the interest payer – from 1 April 2020, the non-declaration rate is 45%.

At the end of the tax year, your income will be squared up to see if you've paid the right amount of tax.

Investment income reporting

 In summary.

  • Details of all investment income are reported to us by payers on a regular basis.
  • 'Investment Income Information' is included in your income profile and can be seen in myIR. This includes the income paid, and the tax withheld from the payment. Income is classified by type - interest, PIE, dividend and source (payer).
  • Investment income from joint accounts is now split equally across all account holders, if the account holder has given a valid IRD number to their payer.
  • If you have a valid RWT exemption, you do not need to show a certificate to your payer. Your IRD number will be included on the new electronic RWT exemption register.