Choosing the Right PIR for Your PIE Investments (2025-26)

If you have KiwiSaver, a managed fund, or another Portfolio Investment Entity (PIE) investment in New Zealand, the rate of tax you pay on investment income depends on your Prescribed Investor Rate (PIR) — not your marginal income tax rate. Choosing the correct PIR matters because too low a rate triggers an automatic end-of-year tax bill, and until recently too high a rate meant overpaying permanently. This article explains how to pick the right PIR for the 2025-26 tax year.

What Is a PIR?

The PIR is the tax rate applied to your share of income earned by a PIE (such as a KiwiSaver fund or a PIE managed fund). The provider deducts PIE tax at your chosen PIR before reinvesting or crediting returns to you. PIR is capped at 28%, which is why high-income earners often save tax compared to their 33% or 39% marginal rate.

PIR Thresholds (statutory)

The PIR you use depends on your total taxable income (excluding PIE) and PIE income in the prior two tax years. You look at both of the last two years and use the lower result.

For the 2025-26 and later income years:

For 2024-25 the thresholds were the older $14,000 / $48,000 / $70,000 — relevant if you are checking a square-up for that year.

Non-resident investors use 28% regardless of income. Trusts have their own separate rules (can elect 0%, 17.5%, or 28%).

The two ladders match now, but they are still different instruments. PIR thresholds come from the Income Tax Act 2007 schedule 6, table 1 (empowered by §HM 56(1)); the PAYE brackets come from schedule 1, part A via §BC 7. The Taxation (Budget Measures) Act 2024 s 39 replaced the schedule 6 figures with the same cutoffs the PAYE brackets got, applying “for the 2025-26 and later income years” — so from 2025-26 they coincide at $15,600 / $53,500 / $78,100. They were genuinely misaligned for 2024-25, between the 31 July 2024 PAYE change and the 1 April 2025 PIR change. Either ladder can be amended on its own, so check the PIR table rather than reading it off the brackets.

How to Pick Your PIR — Worked Examples

Example 1: Salary $45,000 with $2,000 of PIE income

Taxable income for last year: $45,000. PIE income: $2,000. Combined: $47,000.

• Taxable income (excl. PIE) ≤ $53,500 ✓
• Combined ≤ $78,100 ✓
• Taxable income ≤ $15,600? ✗

Correct PIR: 17.5%. Note that their PAYE marginal rate at $45,000 is also 17.5%, so at this income a PIE gives no tax advantage over holding the same investment directly — the choice comes down to fund quality, fees and the reporting convenience of excluded income. Getting the PIR right still matters: leaving it on a provider’s 28% default would overtax them by 10.5 percentage points.

Example 2: Salary $85,000 with $3,000 of PIE income

• Taxable income (excl. PIE) ≤ $53,500? ✗
• Taxable income (excl. PIE) ≤ $15,600? ✗

Correct PIR: 28%. Their marginal tax rate is 33%, so the PIE structure saves 5 percentage points on investment returns.

Example 3: Part-time worker, $12,000 income, $1,500 PIE income

Both conditions met:

• Taxable income (excl. PIE) ≤ $15,600 ✓
• Combined ≤ $53,500 ✓

Correct PIR: 10.5%. Saves significantly vs. the 17.5% default that many providers apply when no PIR is specified.

The Tax Saving at Each PIR

Imagine $10,000 of PIE income across a full tax year:

Compared to paying at marginal 33% ($3,300) or 39% ($3,900) outside a PIE, the 28% cap alone can save a high-earner $500–$1,100 per $10,000 of investment income.

The Default PIR Trap

If you don’t tell your provider a PIR, they must apply the default 28% rate. This used to mean lower-income investors permanently overpaid tax — but since 1 April 2020, IRD auto-reconciles and will refund any over-taxed amount at year end. So the main remaining risk is only for under-withholding:

• If your provider applied 17.5% but your correct rate was 28%, IRD issues a year-end bill for the 10.5-percentage-point shortfall — a $1,050 bill on $10,000 of PIE income in the example above.

Changes of Circumstance — When to Update Your PIR

Tell your PIE provider to update your rate when any of these happen:

• Salary change pushes you across a threshold (e.g. a pay rise from $50k to $60k crosses the $53,500 PIR boundary)
• You stop working and your taxable income drops below $15,600
• You move overseas and become a non-resident
• You inherit a large sum that is invested in a PIE

The PIR is calculated on the lower of the last two years, so a one-off income spike usually does not push you up a band immediately — but a sustained increase should trigger an update.

Joint Accounts

For joint PIE investments (common among couples), the PIR is the highest PIR of any joint holder. If one partner is a 10.5% PIR and the other is 28%, the whole account is taxed at 28%. Some couples split investments into individual accounts to avoid this.

Trusts and PIEs

Trustees can elect from three PIR options for a PIE held by a trust:

With the 39% trustee rate in force from 1 April 2024, the 0% PIR + trust-level taxation is often the best choice for higher-income trusts, because it allows beneficiary income allocations to reduce the effective rate.

Key Takeaways

• Your PIR is determined by income in either of the last 2 years — use the lower result
• Statutory thresholds for 2025-26 onwards: $15,600 / $53,500 (for 10.5%) and $53,500 / $78,100 (for 17.5%), set by Income Tax Act 2007 schedule 6, table 1 — the same cutoffs as the PAYE brackets since the Taxation (Budget Measures) Act 2024, but a separate instrument
• If PIR is too low → IRD auto-issues a year-end bill
• If PIR is too high → IRD auto-refunds (post-2020 rule)
• Joint accounts use the highest partner’s PIR
• High earners save up to 11 percentage points by investing via a PIE capped at 28%

For a full comparison of PIE funds vs. direct investing, see our PIE fund vs direct investment guide and PIE fund tax rates explainer. To estimate the take-home value of different investment structures, combine these rates with the income tax calculator to model your full position.