Inland Revenue Department has discovered 450,000 people have been paying the wrong tax rate on managed investments such as KiwiSaver. This discovery was made in April after IRD introduced its new automated and digitised system.
These 450,000 have provided an incorrect Prescribed Investor Rate (PIR) and despite repeated requests from fund managers and financial advisers, the investors failed to take a few minutes and check what their correct PIR should be. This has resulted in hundreds of thousands of investors paying too much tax and, in many instances, they are now unable to get this back. Others have paid too little tax and will now face larger tax deductions from their investments in coming years.
The PIR for NZ residents is based on their income from either of the last two years. The prescribed guideline rates are:
- 10.5 per cent for those earning a taxable income between 0 and $14,000,
- 17.5 per cent for those between $14,001 to $48,000, and
- 28 per cent for those earning more than $48,001.
Talk to your Milestone adviser if you are unsure on how to check and correct your PIR rate.