RWT vs PIR: Which Rate Taxes Your NZ Savings & Funds?

New Zealand taxes savings and investment income through two different systems, and which one applies depends on what you’re invested in, not how much you earn. Bank interest runs on RWT; PIE funds run on PIR. Mixing them up — or picking the wrong rate within each — is one of the most common reasons people get a surprise bill at year-end. Here’s how to tell them apart and choose correctly.

RWT vs PIR at a Glance

Feature	RWT	PIR
Applies to	Bank interest, most dividends	PIE funds (KiwiSaver, many managed funds)
Rate options	10.5%, 17.5%, 30%, 33%, 39%	10.5%, 17.5%, 28%
Default if not chosen	33% (45% with no IRD number)	28%
Top rate	39%	28% (capped)
Who deducts it	Your bank / payer	Your fund provider

The headline difference: PIR is capped at 28%, even if your income would otherwise be taxed at 30%, 33% or 39%. That cap is the main reason PIE funds can be tax-efficient for higher earners.

RWT: Tax on Bank Interest

When your bank pays you interest, it deducts Resident Withholding Tax before the money hits your account. You tell the bank which RWT rate to use, and that rate should match your total taxable income:

• 10.5% — total income up to $15,600
• 17.5% — $15,601 to $53,500
• 30% — $53,501 to $78,100
• 33% — $78,101 to $180,000
• 39% — over $180,000

If you don’t pick a rate, the bank applies the default 33%. If you’ve never given the bank your IRD number, it must deduct at the no-notification rate of 45% — an expensive reason to make sure your IRD number is on file.

Worked example

You earn $60,000 in salary and $1,000 in bank interest. Your income sits in the 30% band, so you choose a 30% RWT rate. The bank deducts $300 on your interest, leaving you $700. Because 30% matches your marginal rate, there’s nothing more to pay or refund at year-end on that interest.

PIR: Tax on PIE Funds

KiwiSaver and most managed funds are Portfolio Investment Entities (PIEs). Their income is taxed at your Prescribed Investor Rate, which you give to the fund provider. Your PIR is set by your income over the last two income years, using the lower-tax result:

• 10.5% — income (incl. PIE income) of $15,600 or less in either of the last two years
• 17.5% — between the 10.5% and 28% bands
• 28% — higher incomes (and the maximum)

The two-year look-back means your PIR can lag your current income. That’s deliberate — it smooths out one-off income spikes.

Why the 28% cap matters

If you earn $120,000, your salary is taxed up to 33% and your bank interest at 33%. But your PIE income is capped at 28%. For a higher earner, that’s a real saving versus holding the same assets directly. This is why PIE-structured funds are often more tax-efficient than direct shareholdings for people in the top brackets.

What If You Get the Rate Wrong?

This is where RWT and PIR used to differ sharply — and where the rules have improved.

• Wrong RWT rate: Too low and you’ll owe the difference at year-end; too high and it’s refunded. RWT is always squared up in your assessment.
• Wrong PIR: Too low and IRD will bill you for the shortfall. Too high is now also refundable through your end-of-year assessment — a change from the old rule where overpaid PIE tax from a too-high PIR was simply lost.

The practical takeaway: check your PIR every year. A PIR that’s too low costs you a bill; one that’s too high ties up money until your assessment refunds it.

Quick Decision Guide

1. Is it bank interest or a dividend? Use RWT — match the rate to your income, and make sure your IRD number is on file to avoid the 45% rate.
2. Is it a PIE (KiwiSaver / managed fund)? Use your PIR — check it against your last two years’ income, and remember it’s capped at 28%.
3. Unsure which your investment is? Ask the provider whether it’s a PIE. Sharesies, InvestNow and most KiwiSaver schemes are PIEs; a term deposit is not.

Work out your correct rate with our PIR calculator. For deeper dives, see choosing the right PIR for your PIE investments, how PIE funds are taxed and our full RWT explainer.