For investments in Kernel's NZ funds, this all depends on your PIR (prescribed investor rate), your share of tax credits and your tax owed on taxable investment income. For investments in Global and Thematic Funds, it's quite different, click here to read more on tax on those funds.
PIE tax is not directly related to the distributions paid by the fund, or by the change in value of the fund – you might still owe PIE tax even if the fund loses value. It is related to the amount of investment income (a portion of the distribution) received by the fund.
Our funds receive tax credits on some of their investment income – mainly “imputation credits” which represent a credit to you for the tax paid on their profits by the companies that the fund is invested in. The tax credits are designed to prevent double taxation, that is the company has paid company tax, so you don’t also have to pay tax. You may even get a credit for some of the tax the company has paid. This is especially if you have a PIR lower than 28% (the company tax rate). Having tax credits in total at the end of the year means that you will receive a refund.
If you are due a PIE tax refund, we expect that we will receive payment from the IRD in May and we will automatically allocate it to your Kernel wallet.
An example below for a New Zealand investment:
| Dividend paid | Imputation credits | Tax at 28% |
Company A | $10 | $3.89 (full 28%) | $2.80 |
Company B | $10 | $2.50 (only partial NZ profits taxed) | $2.80 |
Company C | $10 | 0 (no NZ profits) | $2.80 |
Investment Income | $30 | $6.39 | $8.40 |
In this example, only $2.01 of tax is owed by the investor (effectively 6.7% of the $30 of net dividends paid).