Tax-Efficient Investing Guide — PIE Funds, FIF, and Structuring in NZ
the tax-efficient investing in New Zealand. The guide covers the PIE fund benefits with the capped 28% tax rate, the optimal FIF method selection, the KiwiSaver tax advantages, and the direct versus the managed fund comparison.
PIE Fund Tax Advantages
The Portfolio Investment Entity (PIE) funds offer the most significant tax advantage for the NZ investors. The PIE income is taxed at the maximum 28% rate regardless of the investor's marginal tax bracket. For the investors in the 33% or 39% brackets, the PIE provides the tax saving of 5 to 11 percentage points. The PIE funds pay the tax on behalf of the investors using the prescribed investor rate (PIR), and the investor does not need to include the PIE income in the personal tax return. The common PIE investments include the KiwiSaver funds, the managed funds, and the term deposit PIEs. See our PIE Guide → for the full PIE rules.
Direct Investing versus Managed Funds
The tax treatment varies between the direct share investing and the managed fund investing. The direct NZ shares provide the imputation credits but require the individual tax tracking. The direct foreign shares over $50,000 trigger the FIF rules. The managed funds and the ETFs held through the PIE structure simplify the tax reporting and provide the 28% tax cap. The KiwiSaver funds are the most tax-efficient vehicle for the retirement savings — the member tax credits ($521 per year) and the PIE tax treatment apply. Refer to our Investment Tax Guide → for the broader investment tax rules.