Is KiwiSaver Taxed?
KiwiSaver is taxed three times and never on the way out. Your own contributions come from pay that has already had PAYE deducted. Your employer's contribution is taxed as ESCT before it lands. Your fund's earnings are taxed at your prescribed investor rate. Withdrawals are not taxed at all.
Three taxes, and the money each one touches
These are three separate taxes at three separate rates, collected by three different parties. Confusing them is why the same person can be told KiwiSaver is taxed at 28%, at 3.5% and not at all, and hear something true each time.
| The money | What taxes it | Who applies it |
|---|---|---|
| Your own contribution | Nothing extra. It is deducted from pay that has already had PAYE taken | Your employer, through payroll |
| Your employer's contribution | ESCT, at one of five rates set by last year's earnings | Your employer, before it reaches your account |
| What your fund earns | Your prescribed investor rate: 10.5%, 17.5% or 28% | Your scheme provider |
| The government contribution | Nothing | Nobody |
| What you withdraw | Nothing | Nobody |
Your contributions come out of taxed income
PAYE is calculated on your full gross pay. Your KiwiSaver contribution is then deducted from what is left. Contributing more does not reduce your tax by a cent, and contributing nothing does not increase it.
$70,000 a year at the default 3.5% rate
- 1.Gross pay$70,000.00
- 2.PAYE, charged on the full grossIncome tax plus the ACC earners' levy, before KiwiSaver is touched− $14,445.50
- 3.Your KiwiSaver contribution, 3.5% of grossTaken from what is left, not from your taxable income− $2,450.00
- Reaches your account$53,104.50
The order matters because it is the opposite of what most overseas schemes do. A UK pension or a United States 401(k) generally takes contributions before tax and taxes the withdrawal. New Zealand taxes the contribution and leaves the withdrawal alone. Neither is more generous by construction, but expecting the overseas order is why people look for a deduction that does not exist here.
Your prescribed investor rate
Almost every KiwiSaver scheme is a portfolio investment entity, and every default scheme is. That means the tax on what your fund earns is charged at a rate you choose and notify, called your prescribed investor rate. Two tests decide it, and both read your last two income years rather than this one.
| Taxable income | Taxable plus PIE income | In | Your rate |
|---|---|---|---|
| $0 – $15,600 | $0 – $53,500 | Either year | 10.5% |
| $0 – $15,600 | $53,501 – $78,100 | Either year | 17.5% |
| $15,601 – $53,500 | $0 – $78,100 | Either year | 17.5% |
| $53,501 or more | Any amount | Each year | 28% |
| Any amount | $78,101 or more | Each year | 28% |
Taxable income is your salary, wages and everything else you would put in a tax return. PIE income is what your scheme attributed to you, after any attributed loss. Both tests have to pass for a row to apply, which is why a modest salary paired with a large investment year can still land on 28%.
Either year, not both, and not the average
The lower rates are available if a row is satisfied in either of the last two income years. The 28% rate applies only when neither year qualifies. Published summaries routinely state this as a single-year test, which overstates the rate for anyone who has had one quiet year.
Someone who earned $68,000 last year and $14,200 the year before has a PIR of 10.5%, not 28%. On the recent year alone the answer would be wrong by 17.5% of everything the fund earns, every year, until the low year drops out of the window.
Getting the rate to your provider, and what happens if you do not
- No rate notified. Your scheme applies the default 28%, which is the highest rate available and wrong for anyone whose taxable income was $53,500 or less in either of the last two years.
- No IRD number. A new investor has 6 weeks to supply one. After that the scheme must close the account and return the funds, less tax already charged at 28%.
- The wrong rate, either way. Inland Revenue corrects it in your end-of-year income tax assessment. A rate that was too low leaves tax to pay. A rate that was too high is refunded. You are not penalised for the rate itself, but you do carry the difference until the assessment.
- A change part-way through the year. You can notify a new rate at any time, and your provider may be able to backdate it. Your provider will also ask you to confirm your rate once a year.
If your scheme is not a portfolio investment entity
A small number of KiwiSaver schemes are widely-held superannuation funds rather than portfolio investment entities. Their investment earnings are taxed at a flat 28% and there is no rate for you to choose or notify, so a low-income year cannot reduce it. Your provider's product disclosure statement names which type you are in. Every default scheme is a portfolio investment entity.
What KiwiSaver is never taxed on
- Withdrawals. First home, age 65, significant financial hardship, serious illness or permanent emigration. None of them is taxed on the way out.
- The government contribution. Up to $260.72 a year arrives untaxed and stays untaxed. KiwiSaver government contribution.
- Working for Families and student loan income. Income earned inside a locked-in retirement scheme is excluded from family scheme income and from student loan repayment income. Income from any other portfolio investment entity is not excluded, so a managed fund outside KiwiSaver counts where your KiwiSaver does not.
Next
- ESCT ratesThe five bands, and the effective rate on each
- KiwiSaver employer contributionWhat lands after ESCT is taken off
- KiwiSaver total remunerationWhen the contribution comes out of your own salary
- how to read your payslipWhere the KiwiSaver lines sit
Common questions
Is KiwiSaver taxed in New Zealand?
Yes, in three places. Your own contributions come out of pay that has already had PAYE deducted. Your employer's contribution is taxed as ESCT before it reaches your account. Your fund's investment earnings are taxed at your prescribed investor rate. What you withdraw is not taxed.
Do I pay tax when I withdraw my KiwiSaver?
No. Inland Revenue does not tax money you take out, whether that is a first home withdrawal, a retirement withdrawal at 65, or a financial hardship withdrawal. The tax has already been paid on the way in and on the earnings along the way, which is why nothing is charged on the way out.
What is a prescribed investor rate?
The tax rate your scheme applies to what your investment earns. The three rates for New Zealand residents are 10.5%, 17.5% and 28%. Your rate is set by your income in the last two income years, not by what you earn this year, and you give it to your scheme provider rather than to your employer.
What is my PIR if I earn $70,000?
This year's salary alone does not answer it, because the rate reads the last two income years. On $70,000 of taxable income in both of them the rate is 28%, because $70,000 sits above the $53,500 taxable income ceiling. One low year inside that window, such as a year studying or on parental leave, gives 17.5% or 10.5% instead.
What happens if my PIR is wrong?
Inland Revenue squares it up in your end-of-year assessment. Too low a rate leaves further tax to pay. Too high a rate comes back to you. Giving your scheme no rate at all means the default 28% applies, which is higher than the correct rate for anyone whose taxable income was $53,500 or less in either of the last two years.
Does KiwiSaver income affect Working for Families or my student loan?
No. Income earned inside a locked-in retirement scheme such as KiwiSaver is left out of family scheme income and out of student loan repayment income. Income from other portfolio investment entities is not excluded and does have to be counted.
Do I get a tax deduction for my KiwiSaver contributions?
No. PAYE is calculated on your full gross pay, and your contribution is taken after that, so contributing more does not reduce your tax. New Zealand taxes the money going in and leaves withdrawals alone. Schemes such as a UK pension or a United States 401(k) do the reverse, which is where the expectation of a deduction usually comes from.
Where these figures come from
- IRD. How your KiwiSaver income is taxed
- IRD. New Zealand resident individuals' portfolio investment entity income
- IRD. Information for resident individuals who invest in PIEs (IR855)
- IRD. Employer superannuation contribution tax
2026–27 tax year (1 April 2026 – 31 March 2027). Last verified 30 July 2026.
Related
- employer superannuation contribution taxThe tax on your employer's contribution
- ESCT ratesWhich of the five bands applies to you
- KiwiSaver contribution ratesThe five employee rates, and the default
- KiwiSaver employer contributionWhat your employer adds before ESCT
- KiwiSaver government contributionThe one payment in that is never taxed
- what is PAYEThe tax your contribution is deducted after