What happens if my PIR is too low?

From 1 April 2020, if you use a PIR that is lower than your correct rate, IRD automatically issues a tax bill at the end of the year for the shortfall. Unlike under the old rules, you cannot avoid this by having tax deducted at a lower PIR — it is calculated automatically from your end-of-year income data.

What if my PIR is too high — can I get a refund?

Yes. If you used a higher PIR than required, IRD will refund the overpaid PIE tax automatically as part of the year-end income tax assessment. This is a change from the pre-2020 rules when overpaid PIR tax was lost.

Do I use my own PIR or my partner's for a joint account?

For a joint PIE investment, the PIR is set at the highest applicable PIR of the joint holders. If one partner is a 28% PIR and the other is 17.5%, the joint account's PIR is 28%.

Choosing the Right PIR for Your PIE Investments (2025-26)

If you have KiwiSaver, a managed fund, or another Portfolio Investment Entity (PIE) investment in New Zealand, the rate of tax you pay on investment income depends on your Prescribed Investor Rate (PIR) — not your marginal income tax rate. Choosing the correct PIR matters because too low a rate triggers an automatic end-of-year tax bill, and until recently too high a rate meant overpaying permanently. This article explains how to pick the right PIR for the 2025-26 tax year.

What Is a PIR?

The PIR is the tax rate applied to your share of income earned by a PIE (such as a KiwiSaver fund or a PIE managed fund). The provider deducts PIE tax at your chosen PIR before reinvesting or crediting returns to you. PIR is capped at 28%, which is why high-income earners often save tax compared to their 33% or 39% marginal rate.

2025-26 PIR Thresholds

The PIR you use depends on your total taxable income and PIE income in the prior two tax years. You look at both of the last two years and use the lower result.

PIR rate	Condition (either of the last 2 tax years)
10.5%	Taxable income ≤ $15,600 AND taxable income + PIE income ≤ $53,500
17.5%	Taxable income ≤ $53,500 AND taxable income + PIE income ≤ $78,100
28%	Anyone who doesn’t qualify for a lower rate

Non-resident investors use 28% regardless of income. Trusts have their own separate rules (can elect 0%, 17.5%, or 28%).

How to Pick Your PIR — Worked Examples

Example 1: Salary $45,000 with $2,000 of PIE income

Taxable income for last year: $45,000. PIE income: $2,000. Total: $47,000.

Taxable income ≤ $53,500 ✓
Taxable income + PIE income ≤ $78,100 ✓
Taxable income ≤ $15,600? ✗

Correct PIR: 17.5%. This is lower than their 30% marginal income tax rate — a clear tax saving for holding investments through a PIE rather than directly.

Example 2: Salary $85,000 with $3,000 of PIE income

Taxable income ≤ $53,500? ✗
Taxable income ≤ $15,600? ✗

Correct PIR: 28%. Their marginal tax rate is 33%, so the PIE structure saves 5 percentage points on investment returns.

Example 3: Part-time worker, $12,000 income, $1,500 PIE income

Both conditions met:

Taxable income ≤ $15,600 ✓
Taxable income + PIE income ≤ $53,500 ✓

Correct PIR: 10.5%. Saves significantly vs. the 17.5% default that many providers apply when no PIR is specified.

The Tax Saving at Each PIR

Imagine $10,000 of PIE income across a full tax year:

PIR	PIE tax	Net return
10.5%	$1,050	$8,950
17.5%	$1,750	$8,250
28%	$2,800	$7,200

Compared to paying at marginal 33% ($3,300) or 39% ($3,900) outside a PIE, the 28% cap alone can save a high-earner $500–$1,100 per $10,000 of investment income.

The Default PIR Trap

If you don’t tell your provider a PIR, they must apply the default 28% rate. This used to mean lower-income investors permanently overpaid tax — but since 1 April 2020, IRD auto-reconciles and will refund any over-taxed amount at year end. So the main remaining risk is only for under-withholding:

If your provider applied 17.5% but your correct rate was 28%, IRD issues a year-end bill for the 10.5-percentage-point shortfall — a $1,050 bill on $10,000 of PIE income in the example above.

Changes of Circumstance — When to Update Your PIR

Tell your PIE provider to update your rate when any of these happen:

Salary change pushes you across a threshold (e.g. pay rise from $50k to $60k)
You stop working and your total income drops below $15,600
You move overseas and become a non-resident
You inherit a large sum that is invested in a PIE

The PIR is calculated on the lower of the last two years, so a one-off income spike usually does not push you up a band immediately — but a sustained increase should trigger an update.

Joint Accounts

For joint PIE investments (common among couples), the PIR is the highest PIR of any joint holder. If one partner is a 10.5% PIR and the other is 28%, the whole account is taxed at 28%. Some couples split investments into individual accounts to avoid this.

Trusts and PIEs

Trustees can elect from three PIR options for a PIE held by a trust:

Election	When it makes sense
0%	Trustees will pay tax at the trustee rate (33% or 39%) via the IR6 return
17.5%	For trusts where beneficiaries would be in the 17.5% band
28%	Default rate — conservative and avoids a year-end square-up

With the 39% trustee rate in force from 1 April 2024, the 0% PIR + trust-level taxation is often the best choice for higher-income trusts, because it allows beneficiary income allocations to reduce the effective rate.

Key Takeaways

Your PIR is determined by taxable income in either of the last 2 years — use the lower result
2025-26 thresholds: $15,600 / $53,500 (for 10.5%) and $53,500 / $78,100 (for 17.5%)
If PIR is too low → IRD auto-issues a year-end bill
If PIR is too high → IRD auto-refunds (post-2020 rule)
Joint accounts use the highest partner’s PIR
High earners save up to 11 percentage points by investing via a PIE capped at 28%

For a full comparison of PIE funds vs. direct investing, see our PIE fund vs direct investment guide and PIE fund tax rates explainer. To estimate the take-home value of different investment structures, combine these rates with the income tax calculator to model your full position.