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. This is resident withholding tax (RWT).
Your payer (bank or fund manager), or sometimes a custodian, deducts resident withholding tax from your interest or dividend payment before they pay you.
How much tax do I pay?
The amount of resident withholding tax 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 resident withholding tax rate that the recipient chooses, depending on their income
- dividends and unit trust distributions are all taxed at a resident withholding tax 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.
Changes to investment income reporting
From 1 April 2020, there are changes to how investment income is reported to us. They may affect you whether you pay or receive investment income.
- The non-declaration rate has increased to 45% if you do not provide your payer with your IRD number.
- Details of all investment income are reported to us more regularly.
- Investment income from joint accounts is now split equally across all account holders, if they’ve 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.
You can find more information on the following pages.