The beginning of the new tax year is a reminder to check that your investments are being taxed at the correct rate. You can check the tax rates that apply to you online at www.ird.govt.nz. The Resident Withholding Tax (RWT) rate used for income-producing investments should be the rate that will apply to income you earn over and above your other income.
KiwiSaver members or investors in any other Portfolio Investment Entity (PIE) need to ensure they start the new tax year on the correct Prescribed Investor Rate. Set your PIR too low and you may be in danger of incurring a tax penalty. On the other hand, if your PIR is too high, you will not be able to claim a refund as tax paid in a PIE is final tax. Your PIR is based on your income in the previous two years and for most investors will be 10.5 per cent, 17.5 per cent or 28 per cent. The income bands for these rates are income of less than $14,000, between $14,000 and $48,000 and more than $48,000. Investors whose income is close to these cut-off points, or who have had a substantial change in their income due to a promotion, redundancy or retirement, should pay close attention to their PIR as it may have changed.
It pays to check to see if you are entitled to an income tax refund. This might occur if you only worked part of the year, you had more than one employer, you have expenses you can claim or you qualify for an independent earner tax credit. While there are companies who will check your refunds, you can find out yourself, without having to pay a fee, by registering on the Inland Revenue website and using the online services account.
- Liz Koh is an authorised financial adviser. The advice given is general and does not constitute specific advice. A disclosure statement is free. Call 0800 273 847. For free e-books, see moneymax.co.nz and moneymaxcoach.com
