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 (in some years you may see a tax refund).

• The tax rate applied to earnings from your Mercer KiwiSaver scheme, Mercer FlexiSaver or Mercer Super Trust account is called prescribed investor rate (PIR). The rate could be 10.5%, 17.5% or 28% (and in Mercer FlexiSaver it can also be 0%), depending on your income for the previous two years. The earnings from these accounts are called income from portfolio investments entities (PIE's).
• 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; 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. As part of this year-end calculation Inland Revenue will notify Mercer if you are on an incorrect 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 tax credit, which may be used to reduce any tax to pay on your other taxable income prior to before any overpaid PIE tax being refunded to you.
• If you have not paid enough PIE tax, you'll have a PIE tax liability. If you have not used the correct PIR for the full tax year, liability will be included as part of your tax to pay 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).

• From 2021 tax year end onwards,
  
  
  • IRD notifies the correct PIR based on personal income, and providers like Mercer must update the PIR accordingly;
  • 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 directly 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.

TAX RESIDENCY FOR NEW ZEALAND TAX PURPOSES

If you live and work in New Zealand, it's important to understand your tax residency status. Your tax residency status determines what taxes you'll pay in New Zealand, and it's important to get it right to avoid any potential issues with your PIE fund which can include KiwiSaver, Superannuation and Trust investments.

In New Zealand, you can either be classified as a New Zealand tax resident, or non-resident taxpayer. Your tax residency status is determined by a number of factors, including the amount of time you spend in New Zealand, your intentions for being in New Zealand, and your connections to the country.

It's important to note that your tax residency status can change over time. For example, if you initially come to New Zealand as a non-resident taxpayer but then decide to stay for a longer period of time, you may become a New Zealand tax resident. Similarly, if you're a New Zealand tax resident but then leave the country, you may become a non-resident taxpayer depending on your personal circumstances.

If you're a New Zealand tax resident, your PIR will be based on your taxable income for the previous two income years.

If you're a non-resident taxpayer, your PIR will be 28%. If you do not notify your PIE fund manager, your income earned from the Scheme will be taxed at the default rate of 28%.

What is the process for determining my tax residency status?

You can determine your tax residency by visiting https://www.ird.govt.nz/international-tax/individuals/tax-residency-status-for-individuals

If you're still unsure about your tax residency status in New Zealand, it's a good idea to seek professional advice from a tax expert.

How do I advise of a change in my tax residency status?

To advise a change in your tax residency status, you will need to fill in the Notification of change of tax residency status form available on your online account. To log in click here.

It's important to keep your tax residency status up to date with Mercer to ensure that you are paying the correct amount of tax and complying with New Zealand tax laws.

Additional resources

• https://www.ird.govt.nz/international-tax/individuals/tax-for-non-resident-taxpayers
• https://www.ird.govt.nz/international-tax/individuals/tax-residency-status-for-individuals
• https://www.ird.govt.nz/-/media/project/ir/home/documents/forms-and-guides/ir200---ir299/ir292/ir292-2024.pdf?modified=20240125013926&modified=20240125013926

CHILDREN IN KIWISAVER

Most children in the Mercer KiwiSaver scheme will meet the criteria for the lowest PIR of 10.5%.

You can make significant savings on your child’s behalf if you update their PIR.

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.

1. Login and click  'personal details' on the top right corner
2. Scroll down, and you can see your current PIR rate; as well as selecting your new PIR with rate effective date;
3.  If your PIR is correct then you don't need to do anything.
4. 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 using 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 the period from 1 April to 31 March of the following year. However, an income year can start and end on alternative dates if Inland Revenue consents. The tax year is always the period from 1 April to 31 March of the following year.}

QUESTIONS?

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.