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What is a PIE?

Introduction

A portfolio investment entity (PIE) is a type of entity, such as a managed fund that invests the contributions from investors in different types of investments.

New tax rules have allowed eligible entities to become PIEs since 1 October 2007.

Eligible entities that elect to become a PIE will generally pay tax on investment income based on the prescribed investor rate (PIR) of their investors, rather than at the entity's tax rate.

How PIE income affects investors' entitlements to WfFTC, student loan or child support obligations

Income earned through a PIE will generally not affect investors' entitlements to Working for Families Tax Credits (WfFTC), or their student loan or child support obligations.

However from 1 April 2011 if the funds you have in the PIE are not locked in a fund such as in a KiwiSaver and similar retirement scheme or superannuation funds, the PIE income will affect your WfFTC. The PIE income must be included in family income and will need to be included on the Adjust your income (IR215) form.

From 1 April 2014 PIE income that is not in a locked-in PIE will also need to be included for student loans.

If you have declared your locked-in PIE income in your tax return then you can exclude it for Working for Families Tax Credits and student loan purposes.

New foreign investment PIEs

Two new types of foreign investment PIEs have been introduced:

  • a zero-rate PIE, and
  • a variable-rate PIE.

The treatment of New Zealand resident investors in these new PIEs will not change. However, if you are a transitional resident and invest in a foreign investment zero-rate PIE, you may qualify for the 0% PIR. The rules for investors who become residents from 1 April will also change.

Eligible entities

Entities that meet the eligibility requirements can elect to become a PIE if they are a:

  • managed fund, such as a:
    • unit trust, or
    • superannuation fund
  • company
  • benefit fund
  • life fund, or
  • group investment fund.

To find out more about the types of PIEs, please read Portfolio investment entities (PIE).

Investing in a PIE

We cannot comment or provide advice on investment schemes. You should talk to your tax agent or financial adviser.

Record-keeping requirements

You don't have to keep records for excluded income.

If the PIE income is not excluded income because:

  • it has been taxed at a zero rate, or
  • you have given the PIE a rate lower than your correct rate

then you must keep your records relating to that income for seven years.

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