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Term Deposits Guide — Interest Income, RWT, and Tax Rules in NZ

the term deposits and the interest income taxation in New Zealand. The guide covers the RWT tax rates on the interest income, the PIE alternative investments, the joint account reporting, and the disclosure requirements for the tax residents.

RWT and Interest Income

The interest earned on the term deposits is subject to the Resident Withholding Tax (RWT). The RWT rates are 10.5%, 17.5%, 30%, or 33% depending on the account holder's marginal tax rate. The bank deducts the RWT at the source and issues the RWT certificate at the interest payment. If the RWT deducted is less than the taxpayer's marginal rate, the additional tax is payable through the tax return. If the RWT exceeds the marginal rate, the excess is refunded. The account holder must notify the bank of the correct RWT rate using the IRD prescribed certificate. The interest income is reported on the annual tax return and is assessable at the marginal tax rate. See our RWT Guide → for the full RWT rules.

PIE Alternatives and Joint Accounts

The term deposit investors may compare the returns with the Portfolio Investment Entity (PIE) investments, which are taxed at the maximum 28% rate regardless of the marginal tax bracket. For the investors in the 33% or 39% bracket, the PIE investments offer the tax advantage. The joint account term deposits are generally taxed based on the account holders' ownership share — typically 50:50 for the joint accounts. The IRD may require the each holder to declare the income separately. See our Investment Tax Guide → for the broader investment tax comparison.