What PIR is
A PIR is the rate at which a Portfolio Investment Entity (PIE) — like a managed fund or a KiwiSaver scheme fund — taxes the income it allocates to you. Unlike marginal income tax (which goes up to 39%), PIR is capped at 28%. For most New Zealanders this is a tax saving; for low-income earners on the 10.5% rate, it can be substantial. The fund manager calculates and pays the tax on your behalf — you usually don't need to declare PIE income in your annual return.
The three rates and the income bands
There are three PIRs: 10.5%, 17.5%, and 28%. Your correct PIR depends on your taxable income plus PIE income over either of the past two income years (the "lower of the two" rule — IRD applies the rate that benefits you, not the higher of the two). The bands as currently published: if your combined income was NZ$14,000 or less in either year → 10.5%; if NZ$14,000.01–NZ$48,000 → 17.5%; otherwise → 28%. Different rules can apply to non-individual investors (companies, trusts) — those are not covered here.
Worked example — why PIR matters
Consider a NZ$100,000 balance returning 7% per year (NZ$7,000 of income). At a marginal tax rate of 33%, that income would attract NZ$2,310 of tax. Inside a PIE at the 28% PIR, the same NZ$7,000 attracts NZ$1,960 — a saving of NZ$350 per year on this single year. At a marginal rate of 39%, the saving rises to NZ$770 per year. Compounded over 20 years on a growing balance, the wrapper can save tens of thousands of dollars in tax versus holding the same securities directly at your marginal rate.
When does PIR change?
Your correct PIR changes when your taxable income changes — pay rises, pay cuts, redundancy, returning from overseas, retiring, transitioning to self-employment. Every year IRD reconciles your PIR against your actual income; you don't need to wait for that — most fund managers let you change PIR at any time online (the change takes effect at the next distribution). A common pattern: people set PIR to 28% when they start working, never review it, and overpay when income drops (e.g. parental leave, redundancy, retirement) until IRD picks it up.
What happens if your PIR is wrong
IRD reconciles every year. If your PIR was too low, you owe additional tax — pay it via your annual IR3 return. If your PIR was too high (this is common when starting out and defaulting to 28%), the overpayment is refundable from the 2020-21 tax year onwards; for years before 2020-21, the over-paid PIE tax is not refundable. The "not refundable" rule for older overpayments is the most-cited NZ retail tax mistake — it cost some KiwiSaver members hundreds of dollars in over-paid tax during their lower-income years.
Checking and updating your PIR
Step 1: use the IRD calculator (linked in sources) to confirm your correct PIR for the current year. Step 2: log in to your fund manager's investor portal and check what PIR is on file. Step 3: if it's wrong, update it — every NZ retail fund manager has a one-click PIR-change option. Step 4: if you're newly on the wrong-too-high PIR for the current tax year, IRD will refund the overpayment after the year ends; nothing else to do. The whole loop takes under 10 minutes per year and is worth doing every June or July.
PIR with multiple funds
You can have different PIRs at different fund managers — but there's no benefit to it; your correct PIR is the same across every PIE you hold. If you have a managed fund at one manager and a KiwiSaver scheme fund at another, set the same PIR at both. Mismatched PIRs across two PIEs is one of the more common reconciliation errors; IRD will catch it but you may end up with a bigger end-of-year tax bill than expected.