PIE Tax Rates Explained: How Portfolio Investment Entities Work in NZ 2025-26
Contents (10 sections)
- What is a PIE fund?
- How PIE tax differs from regular investment tax
- Prescribed Investor Rate (PIR): the three rates
- How to work out your correct PIR
- Common PIR mistakes and how to fix them
- Why PIEs save you tax: worked examples
- PIE vs non-PIE: side-by-side comparison
- KiwiSaver as a PIE fund
- Common questions
- What to do next
Your KiwiSaver is already saving you tax, and you probably don't know it. Every KiwiSaver scheme in NZ is a PIE (Portfolio Investment Entity), which means your investment returns are taxed at a maximum of 28% — even if your income tax rate is 30%, 33%, or 39%. On a $50,000 balance earning 6%, that's up to $550 per year you're keeping that you wouldn't in a regular savings account. The catch? Your PIR (Prescribed Investor Rate) needs to be set correctly, and most people have never checked theirs.
Most NZ managed funds, term PIEs offered by banks, and many listed funds on the NZX are also PIEs. If you're investing in NZ, you're probably already benefiting from this structure without knowing it (IRD).
What is a PIE fund?
A PIE is a type of managed investment fund that meets specific IRD criteria. Instead of you being taxed directly on your investment income, the fund itself calculates and pays tax on your behalf at your Prescribed Investor Rate (PIR). The fund handles the tax. You receive returns that are already taxed (IRD).
The key advantage: your PIR tops out at 28%. Regular investment income (like interest from a savings account or dividends from shares you hold directly) is taxed at your marginal income tax rate, which could be 30%, 33%, or 39%. PIE funds effectively give higher earners a tax discount on their investment income.
How PIE tax differs from regular investment tax
When you earn investment income outside a PIE, like interest on a bank savings account, it's added to your other income and taxed at your marginal rate. Here's how that compares:
| Your annual income | Marginal tax rate | PIR (max) | Tax rate difference |
|---|---|---|---|
| Up to $15,600 | 10.5% | 10.5% | None |
| $15,601 to $53,500 | 17.5% | 17.5% | None |
| $53,501 to $78,100 | 30% | 28% | 2% saving |
| $78,101 to $180,000 | 33% | 28% | 5% saving |
| $180,001+ | 39% | 28% | 11% saving |
For anyone earning under $53,500, there's no tax advantage. The PIR matches your marginal rate. The benefit kicks in at the 30% bracket and gets larger as your income grows (IRD).
Prescribed Investor Rate (PIR): the three rates
There are only three PIR rates (IRD, 2025-26):
| PIR | Who it applies to |
|---|---|
| 10.5% | Taxable income up to $15,600 in either of the last two income years, OR taxable income plus PIE income up to $48,000 |
| 17.5% | Taxable income up to $53,500 in either of the last two income years, OR taxable income plus PIE income up to $70,000 |
| 28% | Everyone else (taxable income above $53,500, or taxable income plus PIE income above $70,000) |
Your PIR is based on your income over the previous two tax years, not the current year. If your income was higher two years ago than it is now (for example, you've gone part-time), you may be on a higher PIR than necessary. You can update it at any time by contacting your fund provider.
How to work out your correct PIR
Follow these steps (IRD):
- Look at your taxable income (before tax) for each of the last two income years
- Add your PIE income to your taxable income for each year
- Use the lower of the two years to determine your PIR
- If your taxable income alone was $53,500 or less in either year, and your combined income (taxable plus PIE) was $70,000 or less, your PIR is 17.5%
- If your taxable income alone was $15,600 or less in either year, and your combined income was $48,000 or less, your PIR is 10.5%
- If neither applies, your PIR is 28%
Most full-time workers on salaries above $53,500 have a PIR of 28%. That's the default for the majority of KiwiSaver members.
Common PIR mistakes and how to fix them
Mistake 1: Never updating your PIR. Your PIR is based on your income over the last two years. If your income has changed (new job, went part-time, started earning more), your PIR may be wrong. Check it annually.
Mistake 2: Using the wrong PIR after a pay rise. If you crossed the $53,500 threshold, your PIR may need to move from 17.5% to 28%. If you don't update it, you'll underpay tax and owe IRD at year-end.
Mistake 3: Setting your PIR too high. If you earn under $48,000 (combined taxable income and PIE income), you may be entitled to a 10.5% or 17.5% PIR. Paying 28% when you qualify for 17.5% means you're overpaying tax on your investment returns. You can correct this by contacting your provider.
Mistake 4: Assuming PIE tax is automatic. The fund calculates tax at whatever PIR you've told them. If you never provided a PIR, many providers default to 28%. That's correct for most earners over $53,500, but not for everyone.
To update your PIR, contact your KiwiSaver provider or fund manager directly. You can also check your correct PIR using IRD's online tool at ird.govt.nz.
The 60-Second PIR Check: What's your taxable income? Check your income and tax rate →. If your income is above $53,500 and your PIR isn't set to 28%, contact your KiwiSaver provider today.
Why PIEs save you tax: worked examples
These examples assume a $50,000 investment balance earning a 6% gross return ($3,000 per year in pre-tax income).
Example 1: Earner on $70,000 (30% marginal rate)
| Investment type | Tax rate on $3,000 return | Tax paid | After-tax return |
|---|---|---|---|
| PIE fund (28% PIR) | 28% | $840 | $2,160 |
| Non-PIE (e.g. savings account) | 30% | $900 | $2,100 |
| Annual saving with PIE | $60 |
At the 30% marginal rate, the PIE advantage is modest: $60 per year on a $50,000 balance. Over 20 years with compounding, that gap grows to roughly $1,500 in additional returns, assuming reinvestment (IRD rates, Forge Money calculation).
Example 2: Earner on $100,000 (33% marginal rate)
| Investment type | Tax rate on $3,000 return | Tax paid | After-tax return |
|---|---|---|---|
| PIE fund (28% PIR) | 28% | $840 | $2,160 |
| Non-PIE (e.g. savings account) | 33% | $990 | $2,010 |
| Annual saving with PIE | $150 |
At 33%, the saving is $150 per year on the same $50,000 balance. Over 20 years with compounding, that's roughly $4,000 more in your pocket (IRD rates, Forge Money calculation).
Example 3: Earner on $200,000 (39% marginal rate)
| Investment type | Tax rate on $3,000 return | Tax paid | After-tax return |
|---|---|---|---|
| PIE fund (28% PIR) | 28% | $840 | $2,160 |
| Non-PIE (e.g. savings account) | 39% | $1,170 | $1,830 |
| Annual saving with PIE | $330 |
At the 39% marginal rate, the difference is stark: $330 per year on $50,000. Over 20 years, that compounds to roughly $8,500 in additional returns (IRD rates, Forge Money calculation).
Scaling up: larger balances
The savings scale linearly with balance size. Here's what the PIE advantage looks like on $200,000 invested at 6% gross:
| Marginal tax rate | Annual tax in PIE | Annual tax outside PIE | Annual saving |
|---|---|---|---|
| 30% | $3,360 | $3,600 | $240 |
| 33% | $3,360 | $3,960 | $600 |
| 39% | $3,360 | $4,680 | $1,320 |
On a $200,000 balance, someone on 39% saves $1,320 every year by being in a PIE rather than a non-PIE investment with the same return (IRD rates).
PIE vs non-PIE: side-by-side comparison
| Feature | PIE fund | Non-PIE investment |
|---|---|---|
| Maximum tax rate | 28% | Up to 39% (your marginal rate) |
| Tax handled by | The fund (at your PIR) | You (through tax return or RWT) |
| Tax on gains | Final tax (no further tax to pay) | May need adjustment in tax return |
| Include in tax return? | No (PIE income is excluded) | Yes |
| Common examples | KiwiSaver, NZ managed funds, term PIEs | Bank savings, direct shares, foreign funds |
| Best for | Earners above $53,500 | Earners below $48,000 (no advantage to PIE) |
One important detail: PIE tax is a final tax. You don't include PIE income in your tax return, and you don't pay any additional tax on it. If your PIR is set correctly, the tax the fund pays is the end of the story (IRD).
KiwiSaver as a PIE fund
Every KiwiSaver scheme is structured as a PIE. That means your KiwiSaver returns are taxed at your PIR, not your marginal tax rate. For most working Kiwis on salaries above $53,500, the PIR of 28% is lower than their income tax rate of 30%, 33%, or 39% (IRD).
This is one reason KiwiSaver is a tax-efficient way to save for retirement. The 28% PIR cap means your KiwiSaver investment returns are taxed more favourably than equivalent returns earned outside KiwiSaver, on top of the employer contributions and government contributions you receive.
Make sure your KiwiSaver provider has your correct PIR on file. If it's set too high, you're paying more tax than necessary. If it's set too low, you'll owe tax at the end of the year.
Common questions
What does PIE stand for?
PIE stands for Portfolio Investment Entity. It's a type of managed fund that meets IRD's criteria to tax investors at their Prescribed Investor Rate (PIR) rather than their marginal income tax rate. KiwiSaver funds, most NZ managed funds, and bank term PIEs all qualify (IRD).
Why is the PIE tax rate capped at 28%?
The 28% cap was introduced to encourage New Zealanders to invest through managed funds rather than directly. It creates a tax incentive for using PIE-structured investments, particularly for higher earners who would otherwise pay 30%, 33%, or 39% on their investment income (IRD).
Do I need to include PIE income in my tax return?
No. PIE income is a final tax. The fund pays tax at your PIR, and that's the end of it. You don't declare PIE income in your IR3 or individual tax return. This is one of the administrative benefits of PIE funds (IRD).
What happens if my PIR is set too low?
If your PIR is lower than it should be, the fund will pay less tax than required. You'll receive a tax bill from IRD at the end of the year for the shortfall. For example, if your correct PIR is 28% but you're set at 17.5%, you'll owe the 10.5% difference on your PIE income (IRD).
What happens if my PIR is set too high?
If your PIR is higher than it should be, you're overpaying tax on your investment returns. Unfortunately, you can't claim a refund for overpaid PIE tax through your tax return. The only fix is to update your PIR with your provider so future tax is calculated correctly (IRD).
Is a term deposit PIE better than a regular term deposit?
If your marginal tax rate is 30% or higher, yes. A term PIE from a bank pays the same interest rate as a regular term deposit, but the interest is taxed at your PIR (max 28%) instead of your marginal rate. On a $100,000 term deposit at 5%, someone on 39% saves $550 per year with a term PIE versus a standard term deposit (IRD rates).
How often can I change my PIR?
You can update your PIR at any time by contacting your fund provider. There's no limit on how often you can change it. If your income situation changes mid-year (for example, you leave a job), update your PIR as soon as your circumstances change (IRD).
Does the PIE tax advantage apply to KiwiSaver?
Yes. All KiwiSaver schemes are PIEs. Your KiwiSaver returns are taxed at your PIR (max 28%), not your marginal income tax rate. If you earn over $53,500, your KiwiSaver returns are taxed more favourably than equivalent returns in a non-PIE investment (IRD).
What to do next
- Calculate your take-home pay to confirm your marginal tax rate
- Understand NZ tax brackets and where your income sits
- Compare KiwiSaver funds to find the right fund for you
- Learn about managed funds in NZ beyond KiwiSaver
- Read the tax on investment income guide for a broader view
Last updated: 28 March 2026. Sources: IRD (ird.govt.nz). This is educational content, not financial advice.
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This is educational content, not financial advice.