Taxation of PIE income

[Bev73]

As described in the NZX announcement

"CORPACT: BOT: BOT Taxable Bonus Issue Notice

Monday, 24 May 2021

Smartshares Limited is pleased to announce for the period ending 31 May 2021:

o Taxable bonus issue and unit cancellation amount.

You must be a registered security holder of the ETF on Record Date to be
eligible for this distribution and taxable bonus issue and unit cancellation
amount."

[777]

A good table is included in this publication.

https://www.ird.govt.nz/-/media/proj...20210201011148

You do have to include PIE income with taxable income to calculate your PIR to ensure you fall below the applicable levels, 48000 and 70000.

[Snoopy]

A good table is included in this publication.

https://www.ird.govt.nz/-/media/proj...20210201011148

You do have to include PIE income with taxable income to calculate your PIR to ensure you fall below the applicable levels, 48000 and 70000.

Thanks for that reference 777. It answers most questions if read carefully. However, I think the last line conclusion that you have made to your post is wrong. What your reference says is:

"What is a prescribed investor rate (PIR)? The PIR for resident individuals is a prescribed rate based on your taxable income in the last two income years, eg, income from salary, wages and any additional sources of income you would include in your income tax return (1). PIE attributed income (2) will also be taken into account."

(1) Generally you would not include PIE income in your income tax return, so it doesn't count towards determining your PIR.

(2) If you declare PIE income in your tax return, that income is attributed to yourself, and must be included in any total income calculation to work out your indicative tax rate. However, if you just bank the PIE income into your bank account without putting it in your tax return, that income is not attributed to any particular person. All the tax calculations are made within the PIE fund, without reference to any particular person. I would argue that such income is not attributed to a person and so should not be included in any personal income calculation to determine your PIR, and hence IR3 tax obligations.

SNOOPY

[777]

Duplicate...

[777]

Fact is you do not include PIE income in your tax return (IR3) unless there is an advantage to use the imputation credits. However to calculate your PIR you need to consider both taxable income and PIE income.

eg if your taxable income is $10,000 (ie is under $14,000) and you have $37,999 PIE income then your PIE is 10.5%. But if your taxable income is $10,000 and PIE income is $38,001 then your PIR is 17.5%. The table in the guide reflects that.

[herbert240]

This PIE income is very tricky. I do my 90 year old mothers tax return. She has a my IR I set up with IRD. She has a PIE investment with Fisher Funds and has a PIR of 17.5%. I notice the IRD includes PIE income in her my IR.

As an aside I have been claiming expenses (monitoring and admin) for years as advised by her Fishers investment adviser. However this year she got a message from IRD saying the expenses were "denied" quoting a section of the Income Tax Act. I have been scrambling around trying to get a definitive answer from Fishers and others who should know. At this stage it looks as though the IRD may be right. Am not sure if they will go back and reassess past years tax returns! Does anyone on the forum have any experience/knowledge of this issue? Sorry I don't mean to hijack this thread.

[herbert240]

This PIE income is very tricky. I do my 90 year old mothers tax return. She has a my IR I set up with IRD. She has a PIE investment with Fisher Funds and has a PIR of 17.5%. I notice the IRD includes PIE income in her my IR.

As an aside I have been claiming expenses (monitoring and admin) for years as advised by her Fishers investment adviser. However this year she got a message from IRD saying the expenses were "denied" quoting a section of the Income Tax Act. I have been scrambling around trying to get a definitive answer from Fishers and others who should know. At this stage it looks as though the IRD may be right. Am not sure if they will go back and reassess past years tax returns! Does anyone on the forum have any experience/knowledge of this issue? Sorry I don't mean to hijack this thread.

[777]

My guess is that the expense was due to PIE income and you were deducting it from taxable income.

[herbert240]

My guess is that the expense was due to PIE income and you were deducting it from taxable income.

I am still a bit confused 777. Adviser from Fishers says "The PIE system will take the taxation at your prescribed PIR rate and deduct from the figure the amount of fees that have been paid" I guess this means I have been "double dipping" and should not have claimed expenses resulting in refunds?

[777]

I am still a bit confused 777. Adviser from Fishers says "The PIE system will take the taxation at your prescribed PIR rate and deduct from the figure the amount of fees that have been paid" I guess this means I have been "double dipping" and should not have claimed expenses resulting in refunds?

A reasonable summation I think. I am surprised that Fishers give tax advice though.