Time to review your tax rate
Any returns you make on your investment with Mercer are subject to tax. We deduct the appropriate amount from your account and pay it to Inland Revenue on your behalf.
- The tax rate applied to earnings from your Mercer KiwiSaver scheme, Mercer FlexiSaver or Mercer Super Trust account is called your prescribed investor rate (PIR). It could be 10.5%, 17.5% or 28%, depending on your income for the previous two years. The earnings from these accounts are called income from portfolio investments entities (PIE).
- We pay PIE tax to Inland Revenue on your behalf, you don’t need to file a tax return for your Mercer retirement savings accounts; From 1 April 2020 where the wrong PIR has been applied, Inland Revenue calculates the correct PIE tax, Inland Revenue is moving to help make sure investors, including Mercer investors, get on the correct PIR. Inland Revenue undertakes a wash up calculation at each year-end. The PIE tax calculation is undertaken separately to the income tax calculation, as income tax rates can differ to the PIR.
- Inland Revenue will determine the correct PIR that should have been used for the full tax year.
- If you have paid too much PIE tax, you'll have a PIE credit, which may be used to reduce any tax to pay on your other taxable income before any overpaid PIE tax is refunded to you.
- If you have not paid enough PIE tax, you'll have a PIE debit. If you have not used the correct PIR for the full tax year, this debit will be included as part of your tax on your other taxable income.
GET YOUR RATE RIGHT
Choosing the wrong PIR can have significant consequences, so it's best to get it right.
- If you don’t provide your IRD number and your PIR, highest 28% rate will apply.
- If you nominate a rate that is higher than it should be, the adjustment is included in a wash up calculation by Inland Revenue at year-end.
- If your notified rate is too low, you will need to pay any tax shortfall (plus potential interest and penalties).
- 2021 tax year end onwards, IRD will notify the correct PIR based on personal income, and providers like Mercer must update the PIR accordingly;
- 2021 tax year end onwards, overpaid PIE tax may be refunded. Underpaid PIE tax is included in the year-end tax calculation of the member and the member will be required to pay the shortfall to Inland Revenue;
- If you are a new resident, when you work out your PIR, you must include non-New Zealand sourced income for that particular income year – even if you weren't a tax resident in New Zealand when the income was earned. You may elect out of this treatment in some cases, visit Inland Revenue's website www.ird.govt.nz and search for ‘find my prescribed investor rate’ to find out more.
Update Your PIR online
To check or update your PIR, log in to your account online or via Mercer NZ App.
Download App here if you don’t have it yet, it is free and with simplified access after initial login.
- Login and click 'personal details' on the top right corner
- Scroll down, and you can see your current PIR rate; as well as selecting your new PIR with rate effective date;
- If your PIR is correct then you don't need to do anything.
- Click ‘submit’ to complete the changes if you need to update your PIR.
If you are not sure about your tax rate, you can work it out in 2 minutes with this PIR calculator. Alternatively, please refer to the PIR table below.
*Previous two income years refers to the two years prior to the tax year that the PIR is being applied to. An income year is generally 1 April to 31 March of the following year.
CHILDREN IN KIWISAVER
Most children in the Mercer KiwiSaver scheme will meet the criteria for the lowest PIR of 10.5 per cent.
You can make significant savings on your child’s behalf if you update their PIR.
Call us on 0508 637 237. You can find more information on the Inland Revenue website.
Important: Please note that any information in this material regarding legal, accounting or tax outcomes does not constitute legal advice or an accounting or tax opinion and prior to relying and acting on this information it is important that you seek independent advice from a qualified lawyer or an accountant regarding this information.