April 1 2010 Tax Rate Changes

1 April 2010 Tax Rate Changes

The rates of tax that are deducted from interest earned on investments and savings have changed from 1 April 2010. This was done to bring these rates into line with current income tax rates. Some of the income thresholds that you use to determine your correct tax rate also changed.

The changes apply to Resident Withholding Tax (RWT) and Prescribed Investor Rates (PIR) and will affect individuals, trusts and companies.

RaboPlus automatically updated the rates on 1 April 2010. The first time you log onto the RaboPlus secure banking site your new rates will be displayed. You will be asked to confirm or update your rates and you will be required to authorise your rates using your Digipass.

We suggest you contact your tax professional for advice if you are unsure of which rate applies to you.

You can find out more about these tax changes below or by visiting the Inland Revenue website.

What does this mean for me?

The RWT changes will affect you if:

You are currently taxed at an RWT rate of 19.5%
or
You reasonably expect your total annual income to be $14,000 or less
or
You operate a company (unless it is on a 38% RWT rate or exempt from paying RWT)

The PIR changes will affect you if:

You are currently taxed at a PIR of 19.5%
or
Your total taxable income in one of the past two years was $14,000 or less and, when combined with the income from your PIE investments, your total income was $48,000 or less
or
You are the trustee of a trust (other than a unit trust)
or
You are currently taxed at 30%, but your total taxable income in one of the past two years was between $14,000 and $48,000 and, when combined with the income from your PIE investments, your total income was $70,000 or less

We suggest you contact your tax professional for advice if you are unsure of which rate applies to you.

What are RWT and PIR rates?

Resident Withholding Tax (RWT)

Resident Withholding Tax (RWT) is a tax deducted from the gross amount of interest paid to you. It is deducted at the time when the interest is paid (from RaboPlus to you).

When you open a RaboPlus account online, you will be asked to select your RWT rate. In the case of joint accounts, you'll be required to select one rate, which will be applied to all your accounts.

Prescribed Investor Rate (PIR)

The Prescribed Investor Rate (PIR) is the rate of tax a Portfolio Investment Entity (PIE) pays on income earned from your investment in the PIE.

This tax is paid on your behalf by the PIE. The amount of tax is calculated using your PIR. So you need to advise us of your correct PIR rate.

This is important because if you have understated your PIR, you need to file a tax return and pay the tax on the income from your PIE investment. But if you overstate your PIR, over paid PIE tax cannot be refunded.

What are the changes?

The current RWT and PIR rates will be more closely aligned to personal income tax rates and income thresholds. These are the changes effective from 1 April 2010:

RWT rates

For individuals

The current 19.5% rate is being replaced by a rate of 21% on 1 April 2010
A new rate of 12.5% will be available to individuals who reasonably expect their total annual income to be $14,000 or less
A new default rate of 38% will apply to new customers who do not choose an RWT rate. Currently this default rate is 19.5% if you supply your IRD number but don't choose an RWT rate.

For companies

A new rate of 30% RWT will be introduced

PIRs

The current 19.5% rate is being replaced by a rate of 21% on 1 April 2010 and new income thresholds apply to this 21% rate
A rate of 12.5% is being introduced for individuals who in either of the last two income years had a taxable income of $14,000 or less and when combined with income from PIE investments, total income of $48,000 or less
A new rate of 21% will be available for the trustees of trusts (other than unit trusts) to select. They will be able to choose a PIR of 0%, 21% or 30%.
The income thresholds for the 30% rate are rising from their current levels. So you may be eligible for the 21% rate from 1 April 2010. See the 'New PIR rates at a glance' section.

When are the new rates and thresholds coming into effect?

They'll take effect on 1 April 2010. The new rates will apply to any interest or income credited to your accounts or PIE investments from this date.

The new RWT rates

This table shows you the current RWT rates, and the new rates that will be introduced on 1 April 2010.

Individuals

Personal tax rates	Current RWT rates up to 31 March 2010	Current RWT annual income thresholds up to 31 March 2010	New RWTrates from 1 April 2010	Your new annual income thresholds from 1 April 2010
	0%	Must provide a 'Certificate of Exemption' from IRD	0%	Must provide a Certificate of Exemption from IRD
12.5%	19.5%	$0 - $48,000	12.5%	$0 - 14,000
21%	19.5%	$0 - $48,000	21%	$14,001 - $48,000
33%	33%	$48,001 - $70,000	33%	$48,001 - $70,000
38%	38%	More than $70,000	38%	More than $70,000

	Default rates up to 31 March 2010	New default rates from 1 April 2010
For new customers who provide their IRD number, but don't select an RWT rate	19.5%	38%
For new customers who don't provide their IRD number	38%	38%

Companies

Current Company RWT ratesup to 31 March 2010	New Company RWT rates from1 April 2010
0%*	0%*
33%	30%
38%	38%

We suggest you contact your tax professional for advice if you are unsure of which rate applies to you.

* Exempt if Certificate of Exemption held.

The new PIR rates

The tables below show the current PIR rates and the new ones that will apply from 1 April 2010.

New Zealand resident individual investors

Current PIR	If
19.5%	In one of the last two income years: Your taxable income was $38,000 or less; and When combined with the income from your PIE investments your total income was $60,000 or less; and You have provided your IRD number
30%	In both the last two income years: Your taxable income was more than $38,000; or When combined with the income from your PIE investments your total income was more than $60,000; and You have provided your IRD number

Current PIR

19.5%

In one of the last two income years:

Your taxable income was $38,000 or less; and
When combined with the income from your PIE investments your total income was $60,000 or less; and
You have provided your IRD number

30%

In both the last two income years:

Your taxable income was more than $38,000; or
When combined with the income from your PIE investments your total income was more than $60,000; and
You have provided your IRD number

Your new PIR will be	If
12.5%	In one of the last two income years: Your taxable income was $14,000 or less; and When combined with the income from your PIE investments your total income was $48,000 or less; and You have provided your IRD number
21%	In one of the last two income years: Your taxable income was between $14,000 and $48,000; and When combined with the income from your PIE investments your total income was $70,000 or less; and You have provided your IRD number
30%	In both the last two income years: Your taxable income was more than $48,000; or When combined with the income from your PIE investments your total income was more than $70,000; and You have provided your IRD number

Your new PIR will be

12.5%

In one of the last two income years:

Your taxable income was $14,000 or less; and
When combined with the income from your PIE investments your total income was $48,000 or less; and
You have provided your IRD number

21%

In one of the last two income years:

Your taxable income was between $14,000 and $48,000; and
When combined with the income from your PIE investments your total income was $70,000 or less; and
You have provided your IRD number

30%

In both the last two income years:

Your taxable income was more than $48,000; or
When combined with the income from your PIE investments your total income was more than $70,000; and
You have provided your IRD number

If you are a New Zealand resident for tax purposes and are investing jointly with another person, your PIR will be the highest PIR of the joint unit holders

Other investors

You can choose a PIR of	If
0%	If you are New Zealand resident for tax purposes, have provided your IRD number, and are a: Company (includes a unit trust) Registered charity PIE Proxy Superannuation fund
0%, 21% or 30%	If you are a New Zealand resident trustee for a trust (other than a unit trust) and have provided your IRD number. Certain testamentary trusts can also choose the 12.5% PIR.
30%	If you are not a New Zealand resident for tax purposes or you have not provided a PIR

You can choose a PIR of

If you are New Zealand resident for tax purposes, have provided your IRD number, and are a:

Company (includes a unit trust)
Registered charity
PIE
Proxy
Superannuation fund

0%, 21% or 30%

If you are a New Zealand resident trustee for a trust (other than a unit trust) and have provided your IRD number.
Certain testamentary trusts can also choose the 12.5% PIR.

30%

If you are not a New Zealand resident for tax purposes or you have not provided a PIR

We suggest you contact your tax professional for advice if you are unsure of which rate applies to you.