Tax on selling investments in NZ: PIE funds, overseas shares, property and interest

Why this matters when you lose your job

Selling investments to cover living costs can create a tax bill or change your tax position. The amount you declare may also affect other things that depend on your income, like a student loan repayment or Working for Families. This guide is a map of the main rules from Inland Revenue, not a calculator. The detail depends on your own facts, so use the IRD links and talk to a tax adviser or IRD for anything large.

Interest on savings and term deposits

Your bank deducts resident withholding tax (RWT) from interest before paying you. If you've given the bank your IRD number, you can choose the rate: 10.5%, 17.5%, 30%, 33% or 39%, which should match your income tax rate. If you don't choose a rate, 33% is deducted, and if you haven't given your IRD number, the rate is 45%.

• If your income drops because you've lost your job, check whether your rate should change. IRD says to tell your payer using form IR456 (Choose your RWT deduction rate).
• Using a rate that is too low can leave you with a bill at the end of the year. IRD checks whether you paid the right amount of tax then.
• For a joint account, only one RWT rate applies to the account, and income is split equally between holders who gave valid IRD numbers unless you change the split.
• Dividends are different: the RWT rate on dividends is fixed at 33%, deducted by the paying company, and imputation credits may offset it.

These bands are the ones IRD listed as current from 31 July 2024. Check ird.govt.nz for any update before you rely on them.

Managed funds (PIEs) and your prescribed investor rate

IRD explains that a portfolio investment entity (PIE) is a managed fund, and your KiwiSaver scheme might be one. A multi-rate PIE taxes your share of the fund's income at your prescribed investor rate (PIR). The rates are 10.5%, 17.5% and 28%, and as an individual you can't choose 0%.

• Your PIR depends on your income over the past 2 tax years. For the year ending 31 March 2027, IRD says it's based on your income for the years ending 31 March 2025 and 2026. That means a fall in income this year may not change your PIR straight away.
• IRD runs a tool, 'Find your prescribed investor rate', that works out which rate applies. Use it rather than guessing, and re-check each year. Check the income thresholds there as they can change.
• If you don't give your PIE a PIR, it applies the default rate of 28%.
• If you choose a rate that is too low, you may owe more tax at the end of the year. If the PIR was too high, IRD's end-of-year PIE calculation gives you a PIE credit that reduces any income tax you owe, and any leftover credit is refunded.
• You must give your IRD number when you invest in a PIE. For a new investment you have 6 weeks, or the account will be closed.
• If you withdraw your whole investment during a quarter, you may owe tax at year end.

Selling NZ shares: when is it taxable?

IRD's page on share investments says an amount you receive from selling shares is income if you got the shares for the dominant or main purpose of sale. It also applies if you run a share-dealing business or the shares were part of a profit-making scheme.

• Your purpose at the time of buying decides it. A later change of mind doesn't change the answer.
• Buying and selling on a large scale can make you a share dealer. IRD's indicators include frequent, regular trading, a system for buying and selling, and an intention to profit from sales.
• IRD recommends keeping records from the time you buy: notes on why you bought, research, investment plans or advice, and any separation between shares held for sale and those held for other reasons such as dividends.
• Dividends you receive are a separate matter from sale gains.

If you're unsure whether a past purchase was for resale, don't guess. Ask IRD or a tax adviser before you sell.

Overseas shares and the FIF rules

IRD says that if your overseas shareholdings cost more than NZ$50,000 in total, the foreign investment fund (FIF) rules apply and you'll probably need to calculate FIF income using one of 5 methods. Under that threshold the general tax rules apply, and if you haven't chosen the FIF rules you report the dividends in your IR3 and can't claim Australian franking credits.

• The most common method is the fair dividend rate (FDR). It calculates your FIF income as 5% of your opening value for the year (plus an adjustment for shares bought and sold in the same year), whether or not you received any income.
• Currency movements affect the result.
• IRD notes there are a number of exemptions. Its guide IR461, 'Guide to foreign investment funds and the fair dividend rate', has the detail.
• Selling some overseas shares to raise cash can change your opening value for the next year. Ask a tax adviser before large sales.

Selling property: the bright-line rule

For residential property sold on or after 1 July 2024, IRD says the bright-line test looks at whether the bright-line end date is within 2 years of the start date. If it is, profit on the sale can be taxable.

• The test generally doesn't apply to a sale of property that has been your main home (IRD lists conditions on your use of it).
• Business premises and farmland are also excluded, and rollover relief can prevent the test applying in some cases.
• A sale can still be taxable outside the bright-line period if you bought the property intending to sell it, or if you have a pattern of buying and selling.
• IRD has a 'Property tax decision tool' on its site. Use it before selling, and talk to a tax adviser for anything complicated.

If you're thinking of selling a home because you can't keep up repayments, read the bank hardship and mortgage guide first. Selling by choice and in time is usually less costly than a forced sale.

Other things a sale can touch

• Student loan and Working for Families can depend on your income for the year. A taxable gain adds to it. See the student loan guide and the Working for Families guide.
• A redundancy payment is taxed separately from investment income. See the tax-on-redundancy guide.
• Work and Income counts some investments as cash assets. See the savings guide.
• Records matter. Keep contract notes, statements and anything showing why you bought.

For help with a specific tax question, phone Inland Revenue on 0800 227 773 or ask a tax adviser.