Quote Originally Posted by Bjauck View Post
Good point.
Also if you select too high a PIR rate than is actually required for your income level, you are unable to get a refund of the PIE tax already paid. Whereas if you select the top RWT rate for a TD, you can always get a tax refund for any excess paid, after filing a tax return for the relevant tax period.

However, If you select too low a PIR rate on your PIE income for your annual income level, then you could need to pay extra tax as though it were regular interest income. So I think PIE income can end up becoming quite complex for the individual. I guess the intention had been to encourage savings by offering a slightly reduced tax level. DYOR.
Found on the web.

Why do PIE funds have special tax rules?
PIEs were created in October 2007, following the introduction of Kiwisaver. Before then, tax laws meant that investors in New Zealand managed funds could find themselves paying much more tax compared to if they had invested directly in shares – this was a significant disincentive to investing in managed funds and would have discouraged people from joining Kiwisaver.

The PIE rules mean that investors pay tax on their own tax rate (the Prescribed Investor Rate or PIR), which is usually slightly lower than their income tax rate. Under the old rules, managed funds paid tax at the highest rate (33%), which disadvantaged investors on lower tax rates. Also, managed funds paid tax on capital gains when they sold New Zealand shares, while direct investors usually only had to pay tax on dividends – the PIE rules removed this inconsistency.