Resident withholding tax in New Zealand, or RWT, is tax that your bank, fund manager, or a company paying you a dividend takes out of your interest or dividend payment before it lands in your account and sends straight to Inland Revenue. It’s a prepayment against your income tax for the year. Choose a rate that matches your income bracket and give every payer your IRD number, and the system mostly runs itself; get either wrong and you’ll either wait for a refund or face a bill.
What Income RWT Applies To
RWT is deducted from passive investment income paid to New Zealand tax residents. In practice that means two things: interest from savings accounts, term deposits, and credit union accounts, and dividends and unit trust distributions from New Zealand companies.1Inland Revenue. Resident Withholding Tax The payer handles the deduction. Your job is to make sure your IRD number and chosen rate are on file with every institution that pays you investment income.
Portfolio investment entities (PIEs) sit outside RWT. They use prescribed investor rates instead, which follow their own rules.1Inland Revenue. Resident Withholding Tax If you’re not a New Zealand tax resident, RWT isn’t the right regime for you either.
RWT Rates on Interest
The rate you pick should match the top slice of your total taxable income for the year, including salary, business income, and the investment income itself. From 31 July 2024, the individual rates are:
- 10.5% if your total taxable income is up to $15,600
- 17.5% for income between $15,601 and $53,500
- 30% for income between $53,501 and $78,100
- 33% for income between $78,101 and $180,000
- 39% for income above $180,000
The 39% rate was introduced by the Taxation (Income Tax Rate and Other Amendments) Act 2020 and has applied to interest income since 1 October 2021.2Inland Revenue. Taxation (Income Tax Rate and Other Amendments) Act 2020
Companies choose from 28%, 33%, or 39%, with 28% as the default if none is chosen. Trustees generally select from 17.5%, 30%, 33%, or 39%, though trustees of testamentary trusts can use the full range starting at 10.5%.3Inland Revenue. Using the Right Resident Withholding Tax (RWT) Rate
What Happens If You Don’t Pick a Rate
If you give your payer your IRD number but don’t nominate a rate, the default is 33%. That works if your income sits in the $78,101–$180,000 bracket. Below that, you’re overpaying every payday and waiting until the end of the year to see it back. Above $180,000, you’re quietly building an underpayment.
The 45% Non-Declaration Rate
If you don’t provide an IRD number at all, your payer must apply the non-declaration rate of 45%, in effect since 1 April 2020.1Inland Revenue. Resident Withholding Tax That’s higher than any actual tax bracket. You can recover the excess through your end-of-year assessment or income tax return, but not mid-year from the payer. Giving your IRD number when you open the account avoids the whole problem.
RWT on Dividends
Dividends and unit trust distributions from New Zealand companies are taxed at a flat RWT rate of 33%. You don’t choose a rate the way you do for interest; the paying company deducts 33% before the money reaches you.3Inland Revenue. Using the Right Resident Withholding Tax (RWT) Rate
Joint Accounts
A joint account can only have one RWT rate, so both holders have to agree on it. Income from the account is split equally between holders who have given the payer a valid IRD number.
If both holders earn above $180,000, 39% avoids a bill at year-end. If one earns above $53,500 and the other earns less, 30% is a workable middle ground. You can adjust the income split through myIR or by contacting Inland Revenue, and again when your end-of-year assessment is completed.3Inland Revenue. Using the Right Resident Withholding Tax (RWT) Rate
Where a resident and a non-resident share a joint account, RWT is deducted from all interest paid. The non-resident can claim a refund by filing an IR3NR return or an IR386 refund request.
Changing Your Rate When Your Income Changes
Your payer won’t update your RWT rate on its own based on what Inland Revenue knows about you. You have to tell them. A pay rise, a job loss, a new investment, or any other change that shifts your bracket is a prompt to review the rate on every account that pays you interest.3Inland Revenue. Using the Right Resident Withholding Tax (RWT) Rate
End-of-Year Assessment
Inland Revenue receives your RWT information throughout the year. If your only income is wages plus investments where RWT was deducted, your assessment is automatic.4New Zealand Government. End-of-Year Income Tax Assessments Too much withheld means a refund; too little means a bill. The usual causes of a bill are picking a rate below your actual bracket or earning more investment income than you expected.
If you received more than $200 of untaxed income during the year, you need to file an income tax return rather than rely on the automatic assessment. And if you were stuck on the 45% non-declaration rate, the excess comes back through your personal tax summary or return, not from the payer.
RWT Exemptions
Some recipients can receive interest and dividends without RWT deducted at all. The exemption doesn’t remove the underlying tax obligation; it just lets the recipient hold the full payment and settle with Inland Revenue directly. That matters most for organisations that need capital working through the year.
Registered charities are placed on the RWT exemption register automatically once Charities Services confirms the registration, with no separate application needed.5Inland Revenue. Getting an Exemption From Paying Resident Withholding Tax (RWT)
A wide range of other entities can apply, including registered banks, credit unions, friendly societies, portfolio investment entities, local and public authorities, tertiary education institutions, not-for-profit organisations, community housing providers, Boards of Trustees, and funeral trusts.5Inland Revenue. Getting an Exemption From Paying Resident Withholding Tax (RWT) Individuals and entities earning or expecting to earn more than $2 million a year can also apply, as can those who can show they’ll have losses or an RWT refund of $500 or more. If income later drops below the $2 million threshold, Inland Revenue may cancel the exemption.6Inland Revenue. Resident Withholding Tax Exemption Register Not-for-profits with a full income tax exemption or annual income under $1,000 have a separate pathway to exempt status.7Inland Revenue. When Not-for-Profits Do Not Pay Resident Withholding Tax
Applications go in on form IR451.8Inland Revenue. IR451 – Application for Exemption From Resident Withholding Tax (RWT) on Interest and Dividends Once approved, you go on the publicly searchable RWT exemption register, and your payers check that register before paying you without deducting RWT. The exemption stays valid while you keep meeting the criteria it was granted under.6Inland Revenue. Resident Withholding Tax Exemption Register