PIE
A Portfolio Investment Entity (PIE) is a type of managed investment fund that is taxed at the investor's Prescribed Investor Rate (PIR) rather than the standard income tax rates. Most KiwiSaver funds, many term deposits, and a wide range of managed funds operate as PIEs.
The key advantage of PIE funds is that the maximum PIR is 28% — even if your marginal income tax rate is 30%, 33%, or 39%. The 17.5% PIR runs out once your taxable income excluding PIE income passes $53,500 or your combined income passes $78,100 (2026-27) — a separate instrument from the PAYE brackets, even where the cutoffs now coincide — so a PIE is tax-efficient for anyone whose marginal rate is above 28%, not just top-bracket earners. Additionally, PIE income taxed at your correct PIR is excluded income: it is not included in your personal tax return and won't push you into a higher tax bracket.
To ensure you pay the correct amount of tax on PIE income, you need to provide your PIR to your fund provider. Since 1 April 2020 IRD squares the result up either way in your end-of-year assessment (Income Tax Act 2007 ss CX 56(2B) and HM 36B): a PIR that was too low produces a PIE debt you have to pay, and a PIR that was too high produces a PIE credit that reduces any other income tax you owe, with anything left over refunded. Getting it right up front still matters — in a year the fund makes a loss, a PIR that was too high means you were credited more than you were entitled to and IRD claws the difference back.
How it works
Not every managed fund is a PIE, and the ones that are come in different shapes. Most KiwiSaver funds, many bank term deposits marketed as 'PIE term deposits', and a wide range of unit trusts and managed funds are structured as multi-rate PIEs, where each investor's share of the fund's income is taxed at that individual investor's own PIR rather than at a single rate for everyone in the fund. That's why two people holding units in the exact same fund can end up with different effective tax outcomes on an identical underlying return.
PIE tax is deducted by the fund itself rather than appearing on your own return the way RWT-taxed bank interest does — but since 1 April 2020 that no longer means the result is locked in. If the rate actually applied to your PIE income was not your correct PIR, s CX 56(2B) of the Income Tax Act 2007 takes that income out of excluded-income treatment and s HM 36B runs an adjustment in your end-of-year assessment. It works in both directions: a PIR that was too low produces a PIE debt IRD collects, and a PIR that was too high produces a PIE credit, applied first against any other income tax you owe and refunded to the extent anything remains.
For anyone whose marginal income tax rate is 30%, 33%, or 39%, holding investments through a PIE structure caps the tax on that fund's income at the top PIR of 28%, which is a genuine, structural tax saving rather than a timing benefit. For someone still in the 10.5% or 17.5% brackets, PIE funds don't offer the same rate advantage, but they still simplify tax reporting since the income doesn't need to be separately declared.
Example: PIE tax cap versus your marginal rate
Suppose you earn $5,000 of income for the year from a PIE-structured managed fund, and your correct PIR is the top rate of 28%. Tax deducted by the fund is 28% x $5,000 = $1,400.
If that same $5,000 had instead been earned as ordinary income taxed at a 33% marginal rate, the tax would have been 33% x $5,000 = $1,650 — a $250 difference purely from using the PIE structure.
Now suppose an investor mistakenly used a 17.5% PIR instead of the correct 28% on $10,000 of PIE income. Tax actually deducted was 17.5% x $10,000 = $1,750, but the correct amount was 28% x $10,000 = $2,800 — leaving a $1,050 shortfall that IRD collects through the investor's income tax assessment.
The reverse works the same way since 1 April 2020. An investor who used 28% when their correct PIR was 17.5% on that $10,000 paid $2,800 instead of $1,750, so they have a $1,050 PIE credit: it reduces any other income tax they owe for the year, and whatever is left is refunded.
Frequently asked questions
What counts as a PIE investment?
KiwiSaver funds, PIE-linked term deposits offered by some banks, and many managed or unit trust funds are structured as PIEs — check your fund's investment statement or ask your provider directly if you're unsure whether a specific product is PIE-taxed.
What rate applies if I never give my fund provider a PIR?
Providers must apply a default rate if you don't supply your own PIR, which is generally the top PIR of 28% — supplying your correct, lower PIR (if applicable) avoids being taxed more than necessary.
What happens if I used a PIR that was too high?
You get the excess back. Since 1 April 2020 IRD works out what you should have paid at your correct PIR and puts the difference through your end-of-year assessment as a PIE credit — it reduces any other income tax you owe first, and anything remaining is refunded. The one case where too high a PIR still costs you is a year the fund makes a loss: the fund credited you at the higher rate, so IRD claws the excess back. It still pays to update your PIR with your provider whenever your income changes rather than waiting for year end.
Related Terms
KiwiSaver
KiwiSaver is New Zealand's voluntary workplace savings scheme designed to help you build a retirement fund.
PIR
Your Prescribed Investor Rate (PIR) is the tax rate applied to income earned from Portfolio Investment Entities (PIEs), including KiwiSaver funds, PIE term deposits, and managed funds.
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