PIE Funds and Tax Rates: How Portfolio Investment Entities Work in NZ

Portfolio Investment Entities (PIEs) are a popular investment structure in New Zealand that offer a significant tax advantage for many investors. KiwiSaver funds, managed funds, and many term deposits are structured as PIEs. Here’s how their tax treatment works.

What Is a PIE?

A PIE is a type of managed investment fund that pays tax on behalf of its investors at each investor’s Prescribed Investor Rate (PIR) rather than at the fund level. This means your investment returns are taxed at your personal PIR, which may be lower than your marginal income tax rate.

Prescribed Investor Rates (PIR)

Your PIR depends on your taxable income and PIE income over the past two years:

Taxable income (excl. PIE)	Combined (taxable + PIE)	PIR
Up to $14,000	Up to $48,000	10.5%
$14,001 – $48,000	Up to $70,000	17.5%
Over $48,000 (or combined over $70,000)	—	28%

PIR thresholds are set by Income Tax Act 2007 §HM 60 and have been frozen since 2010. They are not the same as the PAYE income-tax brackets ($15,600 / $53,500 / $78,100), which were raised by Budget 2024.

The key advantage: the maximum PIR is 28%, even if your marginal tax rate is 30%, 33%, or 39%. For high earners, this means PIE investment income is taxed at a lower rate than other income.

The Tax Advantage

Consider an investor earning $100,000 salary:

• Their marginal income tax rate is 33%
• But their PIR for PIE investments is only 28%
• On $5,000 of investment returns, they save: $5,000 x (33% - 28%) = $250 in tax

For those earning over $180,000 (39% marginal rate), the saving is even larger — 11 percentage points less tax on PIE income.

PIE Income Is Final

Another benefit: PIE income taxed at your correct PIR is treated as excluded income. This means:

• It doesn’t need to be declared on your tax return
• It won’t push you into a higher tax bracket
• It won’t affect entitlements like Working for Families

This makes PIEs especially attractive for investors who want simplicity and tax efficiency.

Choosing and Updating Your PIR

When you join a PIE fund (including KiwiSaver), you must nominate your PIR. It’s important to get this right:

• Too high: You’ll overpay tax (no refund is available for overtaxed PIE income at 28%)
• Too low: IRD may issue an assessment requiring you to pay the difference, plus possible penalties

Review your PIR each year, especially if your income changes. You can update it through your fund provider or KiwiSaver scheme.

Types of PIE Investments

Common PIE-structured investments include:

• KiwiSaver funds — all KiwiSaver providers use PIE structures
• Managed funds — many NZ managed funds are PIEs
• PIE term deposits — some banks offer term deposits structured as PIEs, beneficial for higher earners
• Cash PIE funds — low-risk cash funds offering the PIR tax benefit

Multi-Rate vs Single-Rate PIEs

Most retail PIEs are multi-rate PIEs, meaning each investor is taxed at their own PIR. Some wholesale or institutional PIEs are single-rate PIEs taxed at 28% for all investors.

Sources

• Portfolio investment entities — IRD
• Prescribed investor rates — IRD