Navigating Investor Tax in New Zealand: What Kiwi Investors Should Know in 2025

14th October 2025
Stephen Ryan 

Disclaimer: This article is intended to be a plain English, article guiding investors to ask the right questions. To keep things simple, some details have been generalised and technical points left out. For example I say "tax rate" when "marginal tax rate" is the technically correct thing to say. Always check with your accountant about how these principles apply to your situation. For tailored advice, specific to your needs, please contact us at info@stepaheadaccounting.co.nz. 

None of this is financial advice. I'm an accountant, not a financial advisor so I'm only stating facts about tax, not advising you about how to invest your money.

For New Zealand investors, one of the biggest sources of confusion is how investments are taxed. Whether it’s residential or commercial rentals, dividends, PIE funds, or the complex FIF rules, each type of investment has its own quirks. Getting your tax planning right can meaningfully boost your after-tax returns and reduce surprises come tax-time.

In this article, we break down the key tax regimes affecting Kiwi investors in 2025, draw on real-world questions from investors, and offer practical tips to structure your investments in a tax-efficient way.

Do I need to file a tax return? Taxed at source vs Paying your own tax

In New Zealand, some investment income is taxed at source, meaning the investment provider reports your income and pays the tax to Inland Revenue on your behalf. 

If you’re an individual (not a company or trust) and you’ve provided your IRD number and correct RWT or PIR rate, then bank interest, PIE income, and New Zealand company dividends are already in Inland Revenue’s system. In most cases, that means you won’t need to file a tax return. 

In contrast, income not taxed at source, such as rental income, foreign dividends, overseas shares subject to FIF rules, or business profits, must be declared in your tax return. 

You'll need to file a tax return if you're investing through a company or trust, regardless of income source.

Knowing which types of income are automatically taxed and which require disclosure can save you from unexpected admin and tax bills at year-end. 

There's an easy way to check. Log onto myIR, in the Income tax box, click the link called "Income Summary," then select the relevant income period and it will show you what information Inland Revenue has about your income. If any taxable income is missing, then you'll need to file a tax return.

New Zealand doesn't have a capital gains tax right? 

New Zealand's relationship with capital gains is a bit of a Ross and Rachel 'will they won't they?' situation. 

While in the strictest definition of the phrase, New Zealand does not have a broad-based capital gains tax, there are plenty of rules and exceptions that act like one.

Here are the six most common situations where gains can become taxable:

• The bright-line test for residential properties that aren't the main home
  At the time of writing, if you buy and sell a residential property that isn't your main home within 2 years, then any gains will be taxable. Losses are ring-fenced, meaning they can only be carried forward to offset future taxable capital gains on sale of residential property.  If you're caught under the bright-line rules, there are capital expenses you can claim which you normally wouldn't be able to, so get in touch with your tax advisor to make sure you're not overpaying.

• Renovating a house while you're living in it, with the intention of selling it for a profit - especially if you're a builder
  You'd be forgiven for thinking that buying a house, living in it while you renovate it and then selling it for a profit would qualify for an exemption under the main home exclusion, and you'd be right for the first one or two, but if you show a pattern of doing this, then Inland Revenue might give you a call saying you're in a profit making scheme, so the gains are taxable. There are specific rules for builders.

• Share trading
  If you buy NZ shares, with the main purpose of selling them later for a profit, then the gains are taxable. Most people think they get around this by saying that they're intending to hold them for dividend income, but if you have a pattern of buying and selling shares regularly, then Inland Revenue could knock on your door asking you to prove that you actually are holding shares for dividend income. Note that if you're trading in overseas shares that the FIF rules override the share trading rules.

• Overseas investments/FIF income
  The comparative value method is as close to an unrealised capital gains tax as you can get without it being called a capital gains tax.  Even the FDR method is based on the opening market value of the investment, so it has a capital element to it too.

• Precious Metals  & Cryptocurrencies
  Assets like gold and bitcoin are very easy to get caught out on. Since they don't have dividends, the default assumption is that you've purchased this for a profit, so you would need to be able to prove why you bought it if you weren't intending to make money. 

• Property Sales in an Active Regular Company
  In order to get the cash from the sale of a property out of a company tax-free, the company needs to be liquidated/wound up. If you're buying multiple properties, it's a good idea to have a separate company for each property, so you can liquidate the relevant company when one of your properties has sold. You should get advice on buying the property in a company, trust, or in your personal name.

Foreign Investment Funds (FIF)

I wrote a more detailed article here: "FIF Income in New Zealand: A Plain-English Tax Guide for Investors" but the oversimplified basics of it are, if you buy $50k or more ($100k jointly with a partner) of shares in an overseas company then there are special rules that apply and you need to file a tax return.

There are a few methods to choose from, but practically speaking there's only two, the Fair Dividend Method, and the Comparative Value method.

The fair dividend method essentially says that your investment is probably going to have returned a 5% gain of the opening market value of your investment, so that's your income and you need to pay tax on that 5% "fair dividend" at your tax rate.

The comparative value method essentially says that whatever your actual gain was (including capital gain + dividends) is your income, so you need to pay tax on that figure.

You can switch methods year to year, but you can't change it between different investments in the same year.

Portfolio Investment Entities (PIEs)

PIEs are relatively new, created in 2007 after KiwiSaver was introduced, and they're an investment vehicle where the tax rate is capped at 28%. 

Since the top individual income tax rate was changed to 39%, investors who earn more than $180k in a year have been asking if they should be switching their investments to a PIE so their investment income can be taxed at 28%, rather than 39%.

If a PIE invests in overseas income, then it must use the fair dividend rate/5% method, so in years where your investment goes down, the PIE doesn't get to use the comparative value method.

Fees are generally a bit higher than other funds, but it depends on the platform and the fund itself.

There's 5 different types of PIEs, but the two most common types are

• a multi-rate PIE, you tell the provider your prescribed investor rate (PIR) and they report your income to Inland Revenue and deduct tax based on your PIR. Calculate your PIR here.

• a listed PIE, you buy these straight off an exchange, and they're taxed at a flat 28%. You don't need to report these, but it's beneficial to do so if your tax rate is less than 28%.

FIF vs PIE - Which is better?

Investors often ask whether they should own their overseas investments through a PIE or directly (under FIF). While there are technical considerations like tax leakage, generally most investors consider:

• Providers fees, 

• Their own tax rate vs their PIR, 

• The compliance burden of having to do the FIF calculations, 

• If there even is a PIE fund for the investment they want to own.

Your provider might tell you how much FIF income you've earned so the compliance burden isn't that big, especially if you need to file a tax return for other income anyway, but others might like simplicity so sell down their FIF investments to the $50k threshold, then hold the rest in PIE funds.

You might prefer the flexibility to pick and choose which funds/companies you want to invest in, or maybe there isn't even a PIE for what you want to invest in. 

From a pure tax perspective, PIE funds are more tax efficient in years where the investments grow by 5% or more if your tax rate is 30% or higher.

Typically holding directly has a better tax outcome when the investment returns are less than 5% (including losses). 

Over the last 10 years, the compounding effect of being able to use the CV method in bad years and the FDR method in good years means that the 'average' investor with direct holdings outperformed people with PIE holdings, even at 39% tax brackets. 

Residential vs Commercial Properties

Residential rental properties are a political football that have been kicked around for as long as I can remember. Every year there seems to be some change to the tax law, with the most recent being changes in the bright-line test, loss ring-fencing, and interest deductibility. Even seemingly unrelated changes, like the update to the Trusts Act in 2019 had ripple effects that impacted investors.

Commercial properties on the other hand are functionally very similar to residential rental properties, but since they don't carry the same political stigma, there are a lot of tax efficiencies that commercial property owners enjoy that residential rental property owners don't.

The introduction of the New Assets Investment Boost allows for a 20% deduction for commercial property depreciable assets like buildings and fit-outs, while residential rental properties are specifically excluded.

There's no bright-line test for commercial properties, no interest deductibility denial, no loss ring fencing, so from a pure tax perspective, there is simply no competition between the two.

Not only that, but because commercial properties are so straightforward, the compliance costs are normally cheaper too.

Conclusion

While tax should never be the sole driver of your investment strategy, it’s still critical to structure your portfolio efficiently. Understanding the nuances of PIEs, FIFs, and capital gains rules can help you keep more of your returns.

At Step Ahead Accounting, we specialise in investment taxation — helping investors nationwide make smarter, more compliant decisions.

Based in Dunedin, New Zealand, we offer free online consultations no matter where you’re based.
Get a step ahead by emailing info@stepaheadaccounting.co.nz