There’s a common misconception that you can safely ignore Kiwisaver when you’re filing your Income Tax Return. The only time you can safely leave Kiwisaver out of your tax return is when you’re on the highest possible Prescribed Investor Rate (PIR). Most people don’t even know what a PIR is, let alone have the ability to check if they’re on the highest one. Do you?
Here’s how it works:
- If your PIR is less than it should have been (or zero-rated) you will need to declare the PIE income in your tax return.
- If your PIR is correct you won’t need to include the tax paid on your Portfolio Investment Entity (PIE) Income in your tax return.
The PIR rates are currently 10.5%, 17.5% and 28%. These are different to the rates of personal income tax (10.5%, 17.5%, 30% and 33%) so before you leave your Kiwisaver out of your tax return you’d better be absolutely certain you know what you’re doing. Most people don’t.
There are also complex rules which may require your Kiwisaver income to go in your tax return the year that you leave Kiwisaver and if you’re in that situation it’s worth booking a consulting session with one of our expert accountants.