If you’re enrolled in KiwiSaver, you’ll need to make sure your PIR is correct.
But what exactly is a PIR? And how does it affect you?
A PIR, or Prescribed Investor Rate, is the amount of tax you pay on the funds in your KiwiSaver account.
Because KiwiSaver is an investment, any returns you receive from this investment is taxed at a rate that’s based on your income. You’ll be taxed at one of the three PIR rates – 10.5%, 17.5% or 28%.
According to the IRD, around 1.5 million Kiwis have the wrong PIR associated with their KiwiSaver earnings, and this can lead to a few problems.
Why PIR is important
You need to make sure you’re paying the correct amount of tax on your KiwiSaver investment otherwise you might be paying too much or too little.
You should check in with your KiwiSaver provider to make sure your PIR is correct, especially because the default tax rate is set at 28%, the highest rate available.
Which PIR should I be on?
That will depend on your taxable income. You can use this calculator on the IRD website to work out your correct PIR rate.
How can I check my PIR?
To check your PIR, you can login to your current KiwiSaver account, or contact your KiwiSaver provider or the IRD.
It’s good practice to check in with your KiwiSaver provider at the end of every financial year, just in case your income has changed and you’re now on the wrong PIR.
What if I’ve paid too much?
In previous tax years, if you were taxed at a higher PIR rate, you wouldn’t be able to receive a refund of the overpaid tax.
However for the tax year 1 April 2020 to 31 March 2021 and going forward, there have been some updates made to this. If you’ve been paying a higher PIR than required for the last tax year, you might be eligible for a refund. Get in touch with the IRD if you think this might apply to you.
What if I’ve paid too little?
If you’ve been taxed at a lower PIR rate than you needed to be, you might owe some tax. It’s best to check in with the IRD to make sure.
If you need a bit more detail around what a PIR is and how you can figure yours out, our advisers are on hand to help. Just get in touch with us to book a free, no-obligation review.