The Benefits of Investing in PIEs

Investments Your Money

For many investors, tax efficiency and simplicity are just as important as returns. That’s where Portfolio Investment Entities (PIEs) come in. Designed specifically for New Zealand investors, PIEs offer unique tax advantages and flexibility that can make a real difference to your after-tax outcomes.

What is a PIE?

A Portfolio Investment Entity (PIE) is a type of managed fund introduced in New Zealand to give investors a more tax-efficient way to invest. Instead of being taxed at your personal income tax rate, income earned in a PIE is taxed at your Prescribed Investor Rate (PIR), which is capped at 28%.

PIEs can include a range of investments such as shares, bonds, and cash, and they are usually managed by professional fund managers.

1. Lower Tax Rates

PIE income is taxed at your PIR, which is capped at 28%. This means if your personal income tax rate is higher (for example, 33% or 39%), you could save significantly by investing through a PIE.

For lower-income investors, PIRs can be as low as 10.5% or 17.5%, offering even greater tax advantages.

2. Final Tax - No Need to File

If you provide the correct PIR, the tax paid on your PIE income is final. That means you do not need to include PIE income in your annual tax return, making life simpler and reducing paperwork.

3. No Tax on Capital Gains

Another advantage of PIEs is that they do not pay tax on capital gains from most New Zealand and certain Australian shares. This allows you to grow your investment without the drag of additional taxes on gains.

4. Diversification and Professional Management

PIE funds often invest across a wide range of asset classes, providing built-in diversification. Many PIEs are actively managed by experienced professionals, which can help reduce risk and enhance long-term returns.

5. Tax Efficiency for Trusts and Joint Investors

Trusts in particular benefit from PIE structures, as PIE income is taxed at a maximum of 28%, which can be lower than the trustee rate of 33% or 39%.

For joint investors, PIEs apply the highest PIR among them, but with careful structuring, investments can be split to optimise tax outcomes.

6. Better After-Tax Returns

When compared with alternatives such as term deposits or direct share investments, PIEs can deliver higher net returns because less tax is taken out along the way.

Why Consider PIEs for Your Portfolio?

For investors looking to grow their wealth in a tax-efficient, well-managed, and straightforward way, PIEs can be a smart option. They not only simplify your tax obligations but also maximise the potential for better after-tax outcomes.

If you would like to explore whether PIEs could be right for you, talk to Mark and the team at Hallam Jones. They can help you structure your investments to take full advantage of these benefits while aligning with your personal financial goals.

Share this page: Facebook LinkedIn Pinterest Twitter