How is my Smart Saver interest taxed?
Kernel Smart Saver is a high-interest savings account. When you earn interest on your Smart Saver, that interest is considered taxable income.
Unlike our investment funds, which are Portfolio Investment Entities (PIEs), the Smart Saver is subject to Resident Withholding Tax (RWT).
Tax is deducted at your personal RWT rate before the interest hits your account. We calculate and deduct this tax automatically, so you don't have to worry about manual payments to Inland Revenue (IRD).
How is interest calculated and paid?
To ensure you get the most out of your savings, we calculate your interest daily based on your closing balance. This interest is then paid monthly into your Smart Saver account, and the tax is deducted at the same time. You will see a line item for "Interest" and "Withholding tax" on your account Activity.
End of year reporting
The New Zealand tax year ends on 31 March. In mid-May, we provide a tax summary within your Kernel account. This document shows the total interest you earned (income) and the total RWT paid for the year.
Tax on joint accounts
For joint Smart Saver accounts, we can only apply a single RWT rate to the account. To ensure you don't underpay your tax obligations, we apply the RWT rate of the account member with the higher tax bracket.
If there is a difference between your individual tax rates, one member may be overcharged during the year. To rectify this, the member who has overpaid may need to file a tax return with Inland Revenue (IRD) at the end of the tax year. The IRD can then assess your share of the joint interest and any excess tax paid may be refunded or credited back to you.
Important disclaimer
Kernel are not tax advisors. The information provided here is for general guidance only and does not constitute tax or financial advice. Tax laws and individual circumstances can vary, so we recommend consulting with a qualified tax professional if you have specific questions about your tax obligations.