Getting a bigger slice of PIE
There can be tangible benefits for some investors if they invest in a PIE registered investment.
The following factors can mean that individuals are often able to pay less tax by investing in a PIE compared with an investment subject to ordinary income tax:
An Individual's share of income from a PIE is taxed at a maximum of 28%.
Investing via a PIE can extend the amount of income that a 10.5% or 17.5% tax rate is applied to
The Individuals tax rate for an investment in a PIE is based on either previous two years income.
Tax paid by the PIE fund is a final tax, which means that there is no requirement for individuals to include PIE income in their tax return unless an incorrect PIR tax rate has been selected.
The benefits of PIE will depend on each investor's circumstances. This information is of a general nature, and we recommend that you talk to your tax advisor to determine if investing in a PIE investment suits your circumstances.
What is PIE?
A Portfolio Investment Entity (PIE) is a managed fund that has certain tax benefits for investors.
An individual investor in Jasper PIE funds will select a Prescribed Investor Rate (PIR). A PIR is similar to a marginal tax rate and is used to calculate and pay tax on income from your investments with Jasper. Jasper will pay tax based on each investor's PIR as advised by each investor.
The PIR rates applicable to individual investors are 10.5%, 17.5% or 28%. A company can nominate a 0% PIR rate - we recommend you seek advice from your respective professional before electing this PIR.
A 10.5% PIR can be elected if the investor's taxable income in either of the last two tax years was less than $14,000 per year, and combined taxable and PIE income were less than $48,000.
A 17.5% PIR can be elected if the investor's taxable income in either of the last two tax years was less than $48,000 per year, and combined taxable and PIE income were less than $70,000.
If an individual's taxable income, in both of the previous two tax years, was greater than $48,000, and combined taxable and PIE income are greater than $70,000, then a 28% PIR must be elected.
Individuals pay a maximum of 28% tax on PIE investment income:
Tax paid by the PIE Fund on behalf of individual investors is a final tax. This means that the individual has no requirement to include this income in their tax return unless the individual has incorrectly advised the manager of a PIR lower than the rate the individual is entitled to.
The highest tax rate applicable to investors investing in a PIE fund is 28%, which is very tax-efficient for investors with income over NZD 70,000, customarily taxed at 33%. Further, for those investors with income over NZD 180,000, this income is taxed at 39% if the income is not derived from a PIE registered investment fund.
This article does not constitute a warranty or advice. You should seek independent professional advice on investments, tax, legal and accounting matters.