Normally either 28% or 17.5% of them only - depending on the PIE rate. The remainder can remain unpeeled
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The above was in respect of listed PIEs - KFL & most of the listed Property vehicles. In respect of these, the so-called PIE tax is in fact an Imputation Credit. Imputation Credits themselves can never be refunded in cash, but if there is an excess of them, then they come of the tax liability prior to PAYE and RWT, so that the effect is that the refund is a cash amount of the excess credits
JeffW, you have a good record of being right on taxation issues before. But even if I accept you are correct, you are saying that the PIE distributions from KFL can be offset against other tax. So whether you use the term 'PIE tax' (like me) or 'income tax' (like you), the result is the same. This tax paid can be offset against other tax liabilities. It is what I call a 'dancing on the head of a pin' argument.
Kingfish may be a listed investment company. But that company has a sole purpose of managing investors funds. The only effective difference I can see is that profits from funds in Kingfish in unit holders hands are all taxed at 28%, rather than on a sliding scale where 28% is the maximum (as in the Fisher NZ Growth Fund). There is no effective difference in the tax treatment of returns in unit holders hands in either case. So we are dancing on the head of a pin again.
I found this example on the IRD site
https://www.ird.govt.nz/roles/portfo...ie-calculation
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McKenzie gave the rate of 28% to her PIE for the tax year ending 31 March 2021.
McKenzie’s PIE has returned income of $1,345 and tax deductions of $376.60 for the year.
The correct PIR determined by Inland Revenue for the 2021 tax year is 17.5%.
Inland Revenue calculates that the correct tax at the rate of 17.5% is $235.38. This results in a PIE credit of $141.22.
The income from McKenzie’s employer has had income tax under deducted of $70.23.
The credit of $141.22 from the over deducted PIE income is offset against the income tax debit, resulting in a remaining refund of $70.99.
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I notice the example did not specifically say if McKenzie actually got her $70.99 refund in cash. But the way the anecdote is written, implies to me that she did.
I am normally a provisional tax payer, although sometimes this is upset by FIF tax obligation swings. What the example above is showing is that although you cannot get a cash refund from overpaid PIE tax, that overpaid PIE tax can be immediately offset against any cash amount owing.
So in my situation where I have provisional tax to pay, but also a tax refund due from the previous year, I can use my overpaid PIE tax to offset my provisional tax bill, while still getting a cash refund from my previous income tax over-payments. Alternatively I could look at this same transaction in a different way. If I take away the individual tax labels and think of all tax refunded and yet to pay as sloshing around in a big tax money bucket, I could consider that the money I got back was from the PIE tax overpaid as a 'cash refund', and the money I have to shell out was from my refund forwarded on from the previous year. As far as I am concerned, a 'tax dollar' is a 'tax dollar' and whatever sub-category label you put on it doesn't matter.
SNOOPY
All sounds good Snoopy, a tax dollar is essentially a tax dollar. Apologies if it sounds like dancing on the head of a pin which in most instances it is for NZ Resident taxpayers. It isn't howver if you don't have sufficeint PAYE/RWT income to "soak up" the Imputation Credits from Listed PIES (note, note multi-rate PIEs). The distinction in the type of PIE can be important - See https://www.ird.govt.nz/roles/portfo...tment-entities
KFL is a listed PIE, so the 17.5% election does not apply at source, but through your tax return, and as mentioned by several people above, is only of use if your income is less than $48,000pa
Apologies too for perhaps being a bit overly technical - I'm an accountant who amongst my client base has a multi-rate PIE for a client, and I'm well aware that it is not straight forward
No problem as in this case details matter.
I wondered if you are willing to comment on that case example I quoted from the IRD website. Do you think McKenzie got her refund of $70.99 in cash? It is an unusual case, because her employer's underpayment of tax on her behalf then turned into an over-payment on overall income, because her PIE tax was deducted at too high a rate. If the IRD are not required to give McKenzie a cash refund, then the employer has taken too much tax off McKenzie. Thus McKenzie can ask her employer to give her a cash refund back (despite the employer deducting nominally less tax than required)?
SNOOPY
No need to apologise, it's better for the observers of this thread to have a professional opinion than one that tries to put it in plain English but fails, or blunders around the legal and tax technical definitions.
This has been a very difficult thread to comprehend, it's put me off buying PIE listed entities, just too complicated and a source of income for my accountant to resolve.