Inland Revenue have announced that a new resident withholding tax rate for high income earners is now available.

If you are New Zealand resident, income that you earn from interest and dividends has tax deducted “at source”. This means that it should be tax free when it is paid to you but only if you have the advised the bank or share register of your correct resident withholding tax rate.

The government introduced a new top marginal tax rate of 39% effective from 1 April 2021 for individuals earning over $180,000.00 per annum. Institutions that pay interest, such as banks and finance institutions, have until 1 October 2021 to make the new rate available for individuals to use.

Individuals, trustees and companies can now update their RWT deduction rate to 39% on interest, but not on dividends. The RWT rate for dividend payments remains at 33%. The company paying the dividend will deduct this amount before paying you.

Higher income earners with interest payments should check with their bank or finance company to ensure that the correct rate is being applied. If a lower resident withholding tax rate is applied, additional tax may apply at tax time. Now is a good time to check to avoid unpleasant surprises.

Equally, it is just as important to check you are on the correct RWT rate to ensure that you are not overpaying tax. While you will be entitled to a refund if this is the case, the refund will not apply until after the end of the tax year on 31 March.

More information is available on the Inland Revenue website here.