Resident Withholding Tax (RWT) NZ: Rates and Choosing Correctly

Q: What happens if I do not choose an RWT rate?

Two default situations, both avoidable: - You gave your IRD number but never picked a rate: the payer applies the 33% default for individuals. If your correct rate is 17.5%, you are handing Inland Revenue an interest-free loan all year. - You did not give your IRD number at all: interest is taxed at the punitive non-declaration rate of 45%. Fixing either takes minutes in your bank's app or internet banking — look for "RWT rate" or "tax details" against each account. Check every institution where you hold deposits; the rate is set per payer, not once globally.

Q: What is the difference between RWT and PIR?

They are parallel systems for different investment types: - RWT applies to direct interest and dividends — savings accounts, term deposits, shares held in your own name. Rates track income tax brackets up to 39%. - PIR applies to PIE fund income — KiwiSaver and most managed funds, including bank "PIE term deposits". Rates are 10.5%, 17.5% and 28%, capped at 28%. The cap difference is why an investor on the 33% or 39% marginal rate often earns better after-tax returns in a PIE cash or term fund than in an ordinary term deposit paying the same headline rate. Our PIR guide and PIE tax guide cover that comparison.

What is resident withholding tax (RWT)?

Resident withholding tax is tax deducted at source from investment income — mainly bank interest and dividends — before it is paid to you. Your bank or the company paying the dividend deducts it and passes it to Inland Revenue, the same way PAYE comes out of wages. The interest that lands in your account is the after-RWT amount.

RWT is generally not an extra tax — it is a prepayment of your income tax on that income. But because you choose the rate your bank applies, choosing badly means overpaying through the year or facing a bill later. This guide covers the rates as at July 2026, verified against Inland Revenue's RWT rate guidance.

What are the RWT rates on interest?

For individuals, the RWT rates on interest mirror the personal income tax brackets. As at July 2026 (bands in place since 31 July 2024), choose the rate matching your taxable income:

$15,600 or less: 10.5%
$15,601 to $53,500: 17.5%
$53,501 to $78,100: 30%
$78,101 to $180,000: 33%
$180,001 and over: 39%

Use your expected income for the current year including the interest itself. If a term deposit's interest will push you over a threshold, the higher rate is the correct choice for that account.

What RWT rate applies to dividends?

Dividends from NZ companies are handled differently: the RWT rate on dividends is a flat 33%, applied so that the combination of imputation credits (the company tax already paid, usually at 28%) plus RWT tops the total credit up to 33% of the gross dividend. You do not choose a dividend RWT rate the way you do with interest.

If your marginal rate is below 33%, the excess credits are taken into account in your end-of-year assessment. If you are on the 39% rate, dividends carry additional tax to pay at year end — the 33% withheld does not fully cover you.

What happens if I do not choose an RWT rate?

Two default situations, both avoidable:

You gave your IRD number but never picked a rate: the payer applies the 33% default for individuals. If your correct rate is 17.5%, you are handing Inland Revenue an interest-free loan all year.
You did not give your IRD number at all: interest is taxed at the punitive non-declaration rate of 45%.

Fixing either takes minutes in your bank's app or internet banking — look for "RWT rate" or "tax details" against each account. Check every institution where you hold deposits; the rate is set per payer, not once globally.

What happens at the end of the year?

Banks report interest and RWT to Inland Revenue throughout the year, and it flows into your automatic income tax assessment. If your RWT rate was too high, the difference comes back as part of your refund; too low, and you will have tax to pay. Since the automatic assessments began, wrong RWT rates self-correct eventually — but a correct rate means the right money in your pocket during the year instead of after it.

What is the difference between RWT and PIR?

They are parallel systems for different investment types:

RWT applies to direct interest and dividends — savings accounts, term deposits, shares held in your own name. Rates track income tax brackets up to 39%.
PIR applies to PIE fund income — KiwiSaver and most managed funds, including bank "PIE term deposits". Rates are 10.5%, 17.5% and 28%, capped at 28%.

The cap difference is why an investor on the 33% or 39% marginal rate often earns better after-tax returns in a PIE cash or term fund than in an ordinary term deposit paying the same headline rate. Our PIR guide and PIE tax guide cover that comparison.

When to get professional advice

RWT on a savings account is simple; portfolios rarely stay that simple. Consider professional input if:

You hold meaningful sums across deposits, shares and funds and have never reviewed the tax wrappers
You are on the 39% rate and receiving significant dividends or interest
You are weighing PIE deposits against ordinary term deposits

We connect New Zealanders with FSPR-registered advisers — get matched or browse the directory.

This guide is general information, not financial or tax advice. Rates are as at July 2026 per Inland Revenue (ird.govt.nz) and can change. For your personal situation, consult an accountant or an FSPR-registered financial adviser.