Resident withholding tax (RWT) is the tax deducted on interest paid to New Zealand tax residents on their deposit accounts. Your bank, fund manager, or a custodian deducts RWT from your interest or dividend amount before they pay you.
The amount of RWT you have to pay varies for each person depending on your tax status, the type of interest or dividends you earn, and the information given to your bank or fund manager. If you pay the wrong tax rate, you could face extra bills at the end of the tax year. You need to tell your provider (bank, fund manager or financial advisor) your IRD number and the tax rate you should pay based on your income. In the case of a joint investment shared with someone else, you pay the tax rate of whoever earns the most money.
The rates for RWT are:
- Income of $14,000 or less: 10.5%
- Income between $14,001 to $48,000: 17.5%
- Income between $48,001 to $70,000” 30%
- Income over $70,000: 33%
It is important that you let your provider know your RWT rate, as if no rate is elected, you will pay a default of 33%, which may be more than you would otherwise pay. In certain circumstances, the tax rate can be 0% for some people. Your provider will deduct tax on your behalf at least once a year when they calculate the interest or dividends you have earned.
Generally, individual taxpayers cannot get an exemption from paying RWT, however, there is a chance you may be exempt if you:
- Predict you will earn more than $2 million a year
- Can prove that you would be due an RWT refund of $500 or more due to losses or other circumstances.
A current Certificate of exemption needs to be presented to your provider if you qualify for one.
