On 1 April 2010 changes to Portfolio Investment Entity (PIE) and Resident Withholding Tax (RWT) tax rates took effect, aligning these rates with changes made to personal tax rates and the 30% company tax rate.
As of 1 October 2010 PIE tax rates will change again, to align with new personal tax rates. The new Prescribed Investor Rate (PIR) options will be 10.5%, 17.5% and 28%. These changes will be applied automatically and will apply to the taxable income that arises after 1 October 2010.
For AXA products that are PIEs, it is intended that there will be no changes to the time that the PIE pays the tax on your investment. Generally the PIE tax is deducted from your units and paid to the Inland Revenue on the earlier of the 31 March or the date of any full withdrawal of your investment.
Prescribed Investor Rate changes
The PIRs and income thresholds for clients in AXA products such as the AXA KiwiSaver Scheme, AXA Personal Superannuation Scheme, AXA Business Superannuation Scheme and ASPIRE State Sector Retirement Savings Scheme, have been changed.
The new PIRs and income thresholds that will apply to individuals for the year ending 31 March 2010 are as follows:
|
If your taxable income was… |
your taxable income plus your PIE income or loss was… |
your PIR is…* |
|
$14,000 or less, and |
$48,000 or less in either of the previous two income years, then |
12.5% (10.5% as from 1 October 2010) |
|
$14,000 or less, and |
$48,001 - $70,000 in either of the previous two income years, then |
21% (17.5% as from 1 October 2010) |
|
$14,000 or less in either or both of the previous two income years, and |
$70,001 or more in both of the previous two income years, then |
30% (28% as from 1 October 2010) |
|
$14,001 - $48,000, and |
$70,000 or less in either of the previous two income years, then |
21% (17.5% as from 1 October 2010) |
|
$14,001 - $48,000 in either or both of the two previous income years, and |
$70,001 or more in both of the previous two income years, then |
30% (28% as from 1 October 2010) |
|
More than $48,001 in both of the previous two income years, and |
any amount, then |
30% (28% as from 1 October 2010) |
|
Non Resident |
|
30% (28% as from 1 October 2010) |
* Don't forget that AXA will automatically change your PIR to the new rate from 1 October 2010.
It is intended that you are entitled to choose the lower PIR based on the relevant income thresholds that apply to your circumstances.
What do I need to do?
From 1 October 2010, AXA will automatically change your PIR to the lower rate in the table above. For example the 12.5% rate will be changed to the 10.5% rate, the 21% rate to the 17.5% rate and the 30% rate to the 28% rate. AXA will apply the default rate of 28% for clients who do not provide their IRD number or elect another rate.
You should review your PIR annually to ensure it is the appropriate rate in your circumstances. If you need further help deciding which rate to use please refer to www.ird.govt.nz or contact your tax adviser.
Other PIR changes
PIRs for non-charitable trusts
There have also been changes to the PIRs that can be used by non-charitable trusts to help trustees manage their provisional tax obligations. From 1 April 2010 non-charitable trusts can elect a 0%, 30%, or 21% PIR. Non-charitable testamentary trusts (for example settled under a will) can elect a 12.5% PIR. If the 0%, 12.5% or 21% PIR is elected the trust will be required to include in its tax return the PIE allocated taxable income and tax credits.
From 1 October 2010 non-charitable trusts can elect a 0%, 28%, or 17.5% PIR. Non-charitable testamentary trusts (for example settled under a will) can elect a 10.5% PIR. If the 0%, 10.5% or 17.5% PIR is elected the trust will be required to include in its tax return the PIE allocated taxable income and tax credits.
PIRs for charitable trusts
Effective from 1 April 2009 trustees of charitable trusts must be zero-rated portfolio investors.
Selection of incorrect PIR
From 1 April 2010 the Commissioner of the IRD can override a PIR incorrectly selected by an investor; the exercise of this discretion would result in the default PIR of 30% applying. From 1 October 2010 the default PIR changes to 28%.
RWT changes
These changes will impact the investors in the AXA Cash Management Fund (CMF). Payments of interest to NZ resident investors are subject to withholding tax based on the RWT rates. The RWT rates for individuals that will be applied from 1 April 2010 together with the new RWT rates that apply from 1 October 2010 are as follows:
|
Marginal income
tax rates |
Marginal income
tax rates as from 1 October 2010 |
RWT Rates
|
New RWT Rates as from 1 October 2010 |
|
12.5% |
10.5% |
12.5% |
10.5% |
|
21% |
17.5% |
21% |
17.5% |
|
33% |
30% |
33% |
30% |
|
38% |
33% |
38% |
33% |
No withholding tax will be deducted where the investor has provided a certificate of exemption from RWT. From 1 October 2010 AXA will automatically change clients from the existing RWT rates to the new RWT rates in the table set out above. The default rate for individuals who do not provide their IRD number or elect another rate will be 33%.
Individuals electing the 12.5% or 10.5% RWT rate need to consider if they have a reasonable expectation that their income will be $14,000 or less.
RWT rate for companies
As from 1 April 2010 AXA will apply the optional 30% RWT rate for companies. This will align the RWT rate on interest paid to companies with the company tax rate.
GST rate changes
GST will increase from 12.5% to 15% as of 1 October 2010. AXA is currently looking at its pricing response to this increase and will let you know more about this in the coming months.
We hope this information gives you an insight into the taxation changes that are taking place soon. Should you want to know more please refer to www.ird.govt.nz.