Resident withholding tax rate remedials

2010 minor amendments to the RWT rates clarify the transition to the new rate for individuals and companies, and ensure PIE trustees can use the company rates.

Resident withholding tax (RWT) rates on interest income were aligned with the current company and individual income tax rates on 1 April 2010. Minor remedial amendments have been made in order to clarify the changes. (Note that the Budget 2010 legislation reduced RWT rates, as a consequence of changes to personal tax rates. These new rates will apply from 1 October.)

A minor amendment has also been made to section 25A of the Tax Administration Act 1994.

Key features

Minor amendments to RWT rates

  • Schedule 1, part D, tables 2 and 3 - Amendments have been made to clarify the transition to the new 38% RWT rate for individuals and companies which elected the 39% rate before 1 April 2010.
  • Schedule 1, part D, clause 4 - A change has been made to ensure that trustees which are portfolio investment entities are able to use the company RWT rates set out in table 3 of schedule 1, part D.

Inland Revenue’s ability to instruct interest payers to change RWT rates

Section 25A was introduced into the Tax Administration Act 1994 last year. It allows Inland Revenue to identify individuals who are on an RWT rate that is inconsistent with their marginal tax rate and instruct interest payers to shift those individuals to the appropriate rate.

An amendment has been made to ensure that the section applies when any individual has had tax withheld by their interest payer at an inappropriate rate (whether elected or not), instead of only where an individual has elected an inappropriate RWT rate.

Application date

The changes apply from 1 April 2010.