Portfolio Investment Entities (PIEs)

Most of TOWER's managed funds are Portfolio Investment Entities (PIEs).  A PIE is a special tax investment entity type which enables fairer taxation of investment income for investors.

Generally, non-PIE managed funds are taxed at 30%, regardless of the marginal tax rates of individual investors in the fund.  PIE funds allocate taxable income to each investor and tax is calculated on that share of income at the investor’s Prescribed Investor Rate (PIR).

Prescribed Investor Rates (PIRs)

Prescribed Investor Rates (PIRs) are the rates of tax that can be applied to the taxable income allocated to an investor in a PIE. The PIR that is applied to an investor’s share of the PIE’s taxable income determines the amount of tax that will be paid by the investor.  It is therefore very important that TOWER has the correct PIR on record for each investor.
 
For the tax year ended 31 March 2010 there are three possible PIRs – 0%, 19.5% and 30%.  If you don’t advise TOWER of your PIR and IRD number, then the default PIR of 30% will be applied.  You must check your PIR each year to make sure that any PIR you have previously advised is still right.  You can check our PIR calculator to work out the correct PIR for this tax year by clicking here.

From 1 April 2010, the PIRs and criteria for selecting your PIR are changing. The new PIRs and criteria are as follows:

Individual NZ resident investors:

In either of the last 2 income years your taxable income was $14,000 or less and your total income (including PIE income) was $48,000 or less	Your PIR is 12.5%
In either of the last 2 income years your taxable income was $14,000 or less and your total income (including PIE income) was more than $48,000 but not more than $70,000	Your PIR is 21%
In either of the last 2 income years your taxable income was $48,000 or less and your total income (including PIE income) was $70,000 or less	Your PIR is 21%
In all other cases for individual NZ resident investors	Your PIR is 30%

Other investors:

Non-resident investor	Your PIR is 30%
Company,unit trust, charity or non-profit organisation	Your PIR is 0%
Trust (excluding charitable trusts and unit trusts) Note: trustees of testamentary trusts may also choose 12.5%	You can choose a PIR of 0%,21% or 30% depending on what best suits your beneficiaries

Investors who are on the 19.5% PIR at 31 March 2010 will automatically be moved to the new 21% PIR from 1 April 2010, unless you advise us of an alternative PIR which should be applied.

The changes come into effect on 1 April 2010. To ensure you are taxed at the correct rate after this date please contact TOWER on 0800 808 808, or investments@tower.co.nz and supply your new PIR with your IRD number.