Understanding your PIR – the tax rate on your KiwiSaver returns

KiwiSaver funds are a type of investment called a portfolio investment entity (PIE), and PIEs don’t tax everyone the same. Instead, tax on your share of the fund’s income is charged at your own prescribed investor rate (PIR) – a rate you tell your provider. Get it right and you pay exactly what you should; get it wrong and you’re either overpaying tax on decades of returns or building up a bill.

The current rates

There are three PIRs for individuals: 10.5%, 17.5% and 28%. Which one applies depends on your income over the last two tax years (a tax year runs 1 April to 31 March). For each of those years, work out your rate using both tests below – then your PIR is the lower rate from the two years.

Based on the thresholds that took effect on 1 April 2025:

• 10.5% – taxable income of $15,600 or less, and taxable income plus PIE income of $53,500 or less.
• 17.5% – taxable income of $53,500 or less, and taxable income plus PIE income of $78,100 or less.
• 28% – everyone above those limits. This is also the default if you never provide a rate, and it’s the maximum – PIE tax never goes above 28%, even if your income tax rate is higher.

Thresholds are set by the Government and can change – confirm the current figures at ird.govt.nz if you’re near a boundary.

What your PIR actually applies to

This is the part that trips almost everyone up, and it is worth a minute.

Your PIR is not the share of your returns that goes to tax. A 28% PIR does not mean 28 cents in every dollar your fund earns goes to Inland Revenue. The rate is applied to the fund’s taxable income, which is a different and usually much smaller number than the fund’s return, because different investments are taxed in quite different ways:

• New Zealand shares, and most Australian listed shares. Gains are not taxed at all. Only the dividends are, and those normally arrive with tax credits attached that the fund puts to use.
• International shares. Taxed on a set 5% of what they were worth at the start of the year, whatever they actually did. Not 5% of the gain: 5% of the value.
• Cash and bonds. Interest is taxed in full. This is the only part that behaves the way most people picture.

So the tax depends on what your fund holds, not on how well it did. Two consequences catch people out:

• Two funds earning the same return can pay quite different tax, because one holds more shares and the other holds more bonds. Growth funds tend to lose less of their return to tax than conservative ones, which is the opposite of what most people assume.
• A fund can lose money in a year and still be taxed on it. Those international shares are taxed on 5% of their value whether they rose or fell.

You can look up the real number for your own fund

You do not have to take our word for this, or work anything out. Every KiwiSaver fund publishes a fund update each quarter, a short standard document in the same format for every provider, and it shows the fund’s return twice: once before tax, and once after tax. The gap between those two lines is what tax actually cost that fund. The after-tax line is calculated at the highest PIR of 28%, so if your PIR is lower, your own tax is lower again.

Look up a few funds and the pattern is consistent: that gap is a good deal smaller than the PIR itself, and it differs from one fund to the next even where the returns are similar. That is this whole section in one place, in the providers’ own published figures rather than anything we have worked out.

You can find your own fund’s update by searching for it on Smart Investor, the Government’s free comparison site.

Why the wrong PIR costs you money

• Too high (for example, staying on the 28% default when you qualify for 17.5%): you pay more tax than the law asks, year after year, on returns that would otherwise be compounding for you. Inland Revenue now reviews PIRs and can refund recent overpaid PIE tax – but it’s far better not to overpay in the first place.
• Too low: Inland Revenue will square it up after the end of the tax year, so an artificially low rate isn’t a saving – it’s just a deferred bill.

How much is at stake? The 28% and 17.5% rates are about ten percentage points apart, but those ten points apply to the fund’s taxable income, not to its return, so the real cost is a good deal smaller than “a tenth of your growth”. It is still worth fixing. It is a small leak that runs every year, on a balance that is compounding the whole time, and nobody writes to tell you about it.

When your PIR commonly changes

Your income moving across a threshold is the trigger, and it happens more often than people expect:

• Dropping to part-time work, taking parental leave, or a period out of work.
• A student or young person starting their first full-time job (rate goes up).
• Retiring – lower income in your first retired years often means a lower PIR.
• One unusually good year (a redundancy payout, big overtime) – remember the two-year, lower-rate rule can keep you on the lower PIR.

A good habit: check your PIR whenever your income changes meaningfully, and once a year regardless – it takes two minutes in your provider’s app or portal.

PIE tax is quietly a KiwiSaver advantage

For higher earners, the 28% PIR cap means the fund’s taxable income is taxed at most at 28%, even if your income tax rate is 33% or 39%. That’s one of the reasons KiwiSaver is such an efficient long-term savings vehicle – the tax treatment inside the fund is as good as or better than holding the same investments directly.

Where to check and update yours

Your PIR is in your KiwiSaver provider’s app or online portal, and on your annual statement. Update it there directly, or through myIR. If you’re not sure which rate applies – or your income has moved around over the last two years – get in touch and we’ll work it out with you as part of a KiwiSaver review. Our fact find estimates your PIR from the income you give us, and we confirm it before anything is set.