When it comes to paying tax on your PIE investment, the tax will be levied at your prescribed investor rate. But ““ what exactly is your “prescribed investor rate”?
In New Zealand we have a graduated tax rate. That is, the more you earn, the higher your tax rate will be. As an example, for the current financial year earnings up to $14,000 are taxed at 10.5% and earnings between $14,001 and $48,000 are taxed at 17.5%. The table below outlines the current tax rates for various levels of earnings.
Rates for tax year 2012-2013
|Taxable income||Income tax rates for every $1 of taxable income (excl ACC earners’ levy)||PAYE rates for every $1 of taxable income (incl ACC earners’ levy)|
|up to $14,000||10.5 cents||12.20 cents|
|from $14,001 to $48,000||17.5 cents||19.20 cents|
|from $48,001 to $70,000||30 cents||31.70 cents|
|$70,001 and over||33 cents||34.70 cents|
|No-notification||45 cents||46.70 cents|
|Source: Inland Revenue Department|
Your PIR represents the upper rate at which you pay tax. It is based on your taxable income from your salary or wages as well as any additional sources of income that you would include in your income tax return. It is based on your previous two income years and, if you qualified for a lower rate in one year over the other, your PIR is the lower rate.
There are separate rules for new residents, non-residents and other investors. Visit the Inland Revenue Department for more information.