Portfolio Investment Entities (PIEs) — including most KiwiSaver funds, managed funds, and some term deposits — use a special tax regime that taxes investors at their Prescribed Investor Rate (PIR) rather than their marginal income tax rate. For most investors, this results in a lower tax bill than investing directly.
PIE funds (KiwiSaver, most managed funds) tax you at your Prescribed Investor Rate (PIR) — either 10.5%, 17.5%, or 28%. The key benefit: even the top PIR rate is 28%, meaning investors on the 33% or 39% marginal rate save 5–11% on their fund's returns. Tax is deducted by the fund before you receive income. Choosing the correct PIR is your responsibility — using a rate that is too low results in a tax bill at year end.
What Is a PIE?
A Portfolio Investment Entity is a fund or investment vehicle that meets IRD’s criteria to use the PIE tax regime. Most common PIEs in NZ:
- KiwiSaver funds (all major providers: Milford, Simplicity, Fisher Funds, Booster, etc.)
- Managed investment funds (through InvestNow, Kernel, Milford, etc.)
- Listed PIEs (certain NZX-listed funds structured as PIEs)
- PIE-structured term deposits (some banks offer term deposits in PIE format)
The key distinction from regular investments: PIE income is taxed within the fund at the investor’s PIR before it is distributed or reinvested. You do not declare PIE income on your IR3 (in most cases — see below).
Prescribed Investor Rates (PIR)
There are three PIR rates:
| PIR | Who qualifies |
|---|---|
| 10.5% | Taxable income of $15,600 or less for each of the last 2 years (and total income including PIE income of $53,500 or less) |
| 17.5% | Taxable income of $53,500 or less for each of the last 2 years (and total income including PIE income of $78,100 or less) |
| 28% | Income above those thresholds, OR if you don’t know your rate (default) |
The rate is based on your taxable income from the two most recent tax years. Use the lower of the two years if they differ (subject to the income thresholds).
The 28% cap is the key advantage: Regardless of your marginal rate, PIE income is taxed at a maximum of 28%. If you earn $150,000 from employment (marginal rate 33%), your KiwiSaver returns are still only taxed at 28% — saving 5 percentage points.
How to Calculate Your Correct PIR
Step 1: Look at your taxable income in each of the last two tax years (your income after allowable deductions, but before PIE income).
Step 2: If income was $15,600 or below in either year (and total income including PIE income was $53,500 or below) → use 10.5%
Step 3: Otherwise, if income was $53,500 or below in either year (and total income including PIE income was $78,100 or below) → use 17.5%
Step 4: If income exceeded $53,500 in both years → use 28% (IRD uses the lower rate from either of the last 2 years)
Step 5: If no rate is given, the fund uses 28%. IRD’s end-of-year PIE calculation squares up any wrong rate in your annual assessment (see below)
Setting Your PIR
You must notify each PIE fund of your PIR. Each provider (KiwiSaver manager, managed fund platform) holds your PIR on file and applies it when calculating your tax.
To update your PIR:
- KiwiSaver: Contact your provider or update through their online portal
- InvestNow / Kernel / Sharesies: Update through account settings
- Bank PIE term deposits: Contact your bank
Review your PIR at the start of each tax year — especially if your income has changed significantly.
What Happens If Your PIR Is Wrong?
PIR Too High
You’ve overpaid tax within the PIE. IRD’s end-of-year PIE calculation turns the overpayment into a PIE credit that reduces any income tax you owe, and any remaining credit is refunded to you. In a year the fund makes a loss, too high a PIR gives you too large a tax credit, and IRD collects the difference.
PIR Too Low
You’ve underpaid tax. IRD calculates the shortfall and bills you. This appears on your tax assessment (non-IR3 filers) or IR3 at year end. You pay the difference — there are no penalties for an incorrect PIR as long as you used the rate in good faith.
PIE Income on Your IR3
For most PIE investors (who are not IR3 filers), PIE income is taxed within the fund and does not appear on an income tax assessment at all — it is fully settled within the PIE regime.
However, if you file an IR3 (because you have rental, self-employment, or other income), you must still disclose your PIE income on the IR3 — but it is reported separately and the tax is not recalculated at your marginal rate. It is only included to determine if your PIR was correct.
KiwiSaver as a PIE
All KiwiSaver funds are PIEs. This means:
- Your KiwiSaver returns are taxed at your PIR (max 28%), not your marginal rate
- Tax is deducted before returns are credited to your account
- At the correct PIR there is no separate tax bill or refund on KiwiSaver returns; a wrong PIR is squared up in IRD’s end-of-year PIE calculation
When comparing KiwiSaver returns, funds generally report after-PIE-tax returns — the tax has already been deducted.
Listed PIEs
Some NZX-listed funds are structured as PIEs (e.g., certain exchange-traded funds). These work slightly differently:
- You pay tax at your PIR on distributions
- The fund may or may not handle this withholding automatically
- Check the specific fund’s prospectus for its tax treatment
Frequently Asked Questions
Does PIE income count toward my income for other purposes?
IRD’s rule: “If your PIE income is from a locked-in fund, it is not included as income for Working for Families or student loan calculations.” KiwiSaver is a locked-in fund. PIE income from a fund that isn’t locked in, or a distribution from a listed PIE, does count as income for Working for Families and student loans.
My income varies. Should I use 17.5% or 28%?
The rate follows a rule rather than a choice: IRD uses the lower rate from either of the last two income years, so one year at $53,500 or under (with the combined-income test met) gives 17.5%. Whichever rate the fund uses, IRD’s end-of-year PIE calculation squares up the difference: a shortfall is added to your tax bill, and overpaid tax is credited against income tax with any remainder refunded.
Are there any PIE funds outside KiwiSaver?
Yes. InvestNow, Kernel, Milford, and many other platforms offer non-KiwiSaver managed funds that are PIE-structured. These give you the same tax efficiency (28% max rate) with more flexibility on withdrawals compared to KiwiSaver.
Is the PIE regime the same for companies and trusts?
No. Companies’ PIR rate is 28% and trusts’ PIR rate is 28% by default. Individual-specific rates (10.5% and 17.5%) are only available to individual investors.