KiwiSaver contributions come from before-tax pay, at a set rate. The KiwiSaver scheme invests these contributions made by individuals so that those contributions can earn money straight away. This means that the profits that those contributions make may need to be taxed.
To use the right tax rate, it’s important to know what kind of KiwiSaver scheme the contributions are going into. These can be either
- Widely-held superannuation schemes
- Portfolio Investment Entities (PIEs).
It is important to note that all of the KiwiSaver default schemes will be portfolio investment entities. Product disclosure statements of individuals will have the type of scheme on them. Each scheme type will have a different tax rate on their investment earnings.
The tax rate for a widely-held superannuation scheme stands at 28%. The tax rate from a PIEs investment earnings is referred to as a prescribed investor rate, which will be requested from the provider each year.
