Are You Using The Correct Tax Rate?

The 2012 tax year commenced on 1 April 2011 so now is a good time for investors to check that their investment income for the new tax year is being taxed at the correct rate.

If the wrong rate is used to tax investment income it can result in an unwanted tax bill at the end of the year, and in the case of a Portfolio Investment Entity (PIE) if the wrong Prescribed Investor Rate (PIR) is used it can result in the investor paying more tax than they need to.

If, after checking the tax rates below, an investor feels that they are using the wrong rate they should contact their investment provider and discuss with them accordingly.

Resident Withholding Tax (RWT) Rates

Resident withholding tax is deducted from interest income. The appropriate RWT rates for the 2011 – 12 tax year are as follows:

Individual RWT Rates for the 2011-12 tax year

Income RWT rates for
2011-2012
income years
$0 – $14,000  10.5%
$14,001 – $48,000 17.5%
$48,001 – $70,000 30%
$70,001 and over 33%

Family Trust RWT Rates for the 2011-12 tax year

A family trust has the option of taxing its investment income in the name of the trust or distributing income to beneficiaries where it is taxed at the beneficiary’s marginal tax rate. A family trust therefore has the following options when selecting which RWT rate to use.

Family Trust RWT rate where the income is taxed in the name of the Trust

RWT rates for     2011-2012
income years
Trustee rate 33%

Where the income earned by a family trust is to be distributed to a beneficiary a trust can elect one of the following rates.

RWT rates for     2011-2012 income years
Elected rate where beneficiary income under $14,000 10.5%
Elected rate where beneficiary income between $14,001 – $48,000 17.5%
Elected rate where beneficiary income between $48,001 – $70,000 30%
Elected rate where beneficiary income $70,001 and over 33%

Company RWT Rates for the 2011-12 tax year

RWT rates for     2011-2012
income years
Company default rate  28%

Note a company also has the option to elect an RWT rate of 33%

Partnerships RWT Rates for the 2011-12 tax year

Details