RWT
Resident Withholding Tax (RWT)
Tax that NZ banks and bond issuers deduct at source from interest payments to NZ-resident investors, at the investor's nominated RWT rate.
Resident Withholding Tax (RWT) is the tax that NZ payers — banks, building societies, bond issuers, and some funds — deduct from interest and certain dividend payments to NZ-resident investors before the payment reaches the investor. The investor nominates an RWT rate from a fixed set of options based on their marginal income-tax bracket.
RWT and PIE tax are different regimes. Interest earned directly from a NZ bank deposit is subject to RWT at the investor's personal rate (up to 39%). The same interest earned inside a PIE-structured cash or fixed-interest fund is taxed at the investor's PIR, capped at 28%. This is the structural reason PIE cash funds can be tax-efficient compared to direct bank deposits for higher-rate investors.
RWT is a withholding mechanism, not a final tax — the deducted amount is credited against the investor's end-of-year tax liability. PIE tax, by contrast, is generally final at the PIR.
Primary sources
Related terms
-
PIR
Prescribed Investor Rate (PIR)
The tax rate applied to your share of a PIE fund's taxable income. NZ has three PIRs for resident individuals — 10.5%, 17.5% and 28% — chosen using a two-year look-back of taxable + PIE income.
-
PIE fund · PIE
Portfolio Investment Entity (PIE)
A tax-efficient New Zealand fund structure where investor tax is capped at the investor's Prescribed Investor Rate (PIR), with a maximum of 28%.
-
franking credit (Australia)
Imputation credit
A tax credit attached to a NZ company dividend that represents company tax already paid on the underlying profit, used by the shareholder to offset their personal tax on the dividend.