PIE Tax (PIR)

How your PIR is worked out

Your rate is based on your income in each of the last two tax years, using two tests together.

You qualify for 10.5% if your taxable income was $15,600 or less and your taxable income plus your PIE income was $53,500 or less.

You qualify for 17.5% if your taxable income was $53,500 or less and your taxable income plus PIE income was $78,100 or less.

If neither applies, your rate is 28%.

Those thresholds are the same figures as the income tax bands, and they changed on 1 April 2025 from the old $14,000, $48,000 and $70,000 levels. If the two years point to different rates, the lower one applies.

The defining feature of the regime is the cap. PIE income is taxed at a maximum of 28%, even when your marginal income tax rate is 33% or 39%. For higher earners, money inside a PIE is taxed more lightly than the same income earned directly.

A worked example

An example, using round numbers rather than any real fund's return.

Say your KiwiSaver fund attributes $2,000 of taxable income to you for the year. At the correct 17.5% rate, tax on that is $350. If your PIR is sitting at 28% because you never updated it after a lower-income year, the tax is $560.

That $210 difference is not dramatic in one year. Repeated across a decade in an account you rarely look at, and compounding on the amount that never got invested, it stops being trivial.

The same works in reverse and matters more. A rate set too low means tax was underpaid, and it is squared up later rather than forgiven.

What people commonly get wrong

"My PIR is based on this year's income." It is based on the last two income years, not the current one. A pay rise this year does not change your rate until it flows through, and a low-income year two years ago may still be doing work for you.

"A wrong PIR doesn't matter because IRD sorts it out." Inland Revenue does include your PIE income in your annual income tax assessment, so an incorrect rate gets corrected rather than ignored. That is not the same as no consequence: an underpayment becomes a bill you were not expecting, usually months after the money was spent.

"PIE tax is a KiwiSaver thing." Most New Zealand managed funds are PIEs too, and many banks offer PIE term deposits. If you have several, each one needs the right PIR, and each one asks you separately.

"28% is the default so it's safe." Overpaying is not free either. Providers commonly apply 28% when they have no rate on file, and if your correct rate is 17.5% you have been handing over more tax than you owed on every dollar the fund earned.

The practical habit is to check your PIR once a year, at the same time you do anything else annual. Log in, look at the rate, and update it if your income has moved bracket.

Where it meets your weekly budget

PIE tax will not change what you can spend this week. It is included here because it is one of the few genuinely free wins in New Zealand personal finance: five minutes of admin, no sacrifice, no behaviour change, and it either saves you tax or saves you a surprise bill.

That is a different category from the everyday question of what is actually left after rent, power and instalments have been accounted for, which is what Safe to Spend is for. Both matter. Only one of them needs your attention every week.

This is general information, not tax advice. If your situation is complicated, IRD's PIR tool or an accountant is the right call.