RWT
Resident Withholding Tax (RWT) is tax deducted at source from interest and dividend income paid to New Zealand tax residents. When your bank pays you interest on a savings account or term deposit, they deduct RWT before crediting your account.
You can elect an RWT rate based on your income level: 10.5%, 17.5%, 30%, 33%, or 39%. Choosing a rate that matches your marginal tax rate means you won't have a tax bill or refund on that interest income at year end. If you don't provide a rate, the default 33% rate applies.
RWT-deducted income is included in your annual income tax assessment. If your elected RWT rate was lower than your actual marginal rate, you'll owe the difference. If it was higher, you'll receive a refund. For a more tax-efficient option on interest income, consider PIE term deposits, which cap the tax rate at 28%.
Related Terms
Income Tax
New Zealand income tax is calculated using a progressive bracket system.
IRD
Inland Revenue Department (IRD), commonly known as Inland Revenue or simply IRD, is the New Zealand government agency responsible for collecting taxes, distributing social support payments, and enforcing tax compliance.
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.