Simplicity Investment Funds are structured as PIEs. PIE stands for Portfolio Investment Entity. A PIE invests contributions from investors in different types of investments.
The tax rate for your investment earnings from a PIE is referred to as your prescribed investor rate (PIR). See our FAQ on What's my Prescribed Investor Rate? to calculate your rate.
The investments within Simplicity Investment Funds are taxed based on the tax regime that applies to each type of investment. For example, there is generally no tax paid on capital gains from New Zealand and Australian shares; only on dividends. International shares are taxed under the fair dividend rate (FDR) regime, where tax is paid on a 5% rate of return, regardless of the actual return. Returns from bonds, both local and international, are generally taxed as income.
As the Investment Funds are portfolio investment entities (PIEs), taxable income is calculated daily within each fund. PIE tax is accounted for at an investor level if you make a withdrawal. Otherwise, your PIE tax is accounted for at the end of each financial year at your prescribed investor rate (PIR).
Any tax payable or tax rebate is based on your PIR and is deducted from, or credited to, your account. Although every investor receives a PIE tax statement in May, for most investors PIE income and tax paid does not need to be included in a tax return.
You nominate your PIR when you first invest in a PIE. The options are 10.5%, 17.5% or 28%, based on your income over the last two years. You’re responsible for updating your PIR if your circumstances change. If your PIR is too low, Inland Revenue may require you to pay the difference, and any penalties or interest. If your PIR is too high, any refund will usually be included as part of your end-of-year tax square-up.
As Fund Manager, we manage PIE tax on your behalf. Any tax owing is deducted either when you make a withdrawal, or at the end of the financial year, and we’ll send you a statement reflecting this.
Please make sure we have the correct PIR for you.
You can see information about tax return and PIE income on the Inland Revenue website here.