Resident Withholding Tax (RWT) is tax deducted at source from interest and dividends paid to NZ residents. Banks, investment funds, and companies withhold RWT from investment income before paying it to you — so by the time the money reaches you, the tax has already been paid to IRD.
RWT is automatically deducted from interest (savings accounts, term deposits) and dividends by the payer (bank or company). The default rate is 33%, but you can nominate a lower rate matching your income tax rate (10.5%, 17.5%, 30%, or 33%). If too much RWT was deducted, you get a credit in your tax return. If too little, you pay the difference. Nominate your RWT rate with your bank or investment provider to avoid overpaying.
What Is RWT?
RWT is a withholding tax collected by payers of investment income:
- Banks deduct RWT from savings account and term deposit interest
- Companies deduct RWT from dividends they pay to shareholders
- Trustees deduct RWT from trust distributions in some cases
The payer remits the RWT directly to IRD. You receive the net amount (after RWT). At year end, the RWT withheld is credited against your income tax liability.
RWT Rates
You can nominate your RWT rate. The rates correspond to marginal income tax rates:
| Nominated RWT rate | When to use it |
|---|---|
| 10.5% | Total income under $14,000 |
| 17.5% | Total income $14,001–$48,000 |
| 30.0% | Total income $48,001–$70,000 |
| 33.0% | Total income over $70,000 |
| 39.0% | Total income over $180,000 (since 2021) |
Default rate: If you do not nominate a rate, payers use 33% (the second-highest rate). This often leads to over-withholding for middle-income earners — you receive a credit/refund but lose the use of that money during the year.
How to Set Your RWT Rate
With your bank:
- Log in to online banking
- Go to account settings or tax settings
- Enter your IRD number and select your RWT rate
- Confirm — the new rate applies to future interest payments
With investment providers (Sharesies, InvestNow, etc.):
- Provide your IRD number and nominated RWT rate when setting up your account or in account settings
Always nominate a rate — this prevents the default 33% applying.
RWT on Interest (Savings Accounts and Term Deposits)
Interest earned on savings accounts and term deposits is subject to RWT:
- Your bank deducts the nominated RWT rate from gross interest
- You receive net interest
- The bank reports the interest and RWT to IRD
- At year end, the RWT appears as a credit in your tax return
Example:
- Gross interest earned: $2,000
- RWT at 17.5%: $350
- Net interest received: $1,650
- At year end, $350 credit applied against your income tax
RWT on Dividends
NZ companies deduct RWT from dividends paid:
- The dividend may also carry imputation credits (see below)
- RWT applies to dividends not fully imputed
Dividend components:
- Gross dividend: $1,000
- Imputation credit: $280 (28% company tax already paid)
- RWT: $140 (14% — adjusted so that total tax = 33% on $1,000)
- Net dividend received: $580
Imputation Credits and RWT Interaction
NZ companies pay company income tax at 28%. When they distribute profits as dividends, they can attach imputation credits representing the tax already paid at company level. This prevents double taxation.
If a dividend is fully imputed (carries 28/72 credits), no further RWT is required for most shareholders. The imputation credits are added to the shareholder’s income and credited against their tax.
Imputation credits and RWT both appear in your tax return — the IRD’s automatic assessment includes these where IRD has the data.
RWT at Year End
Your investment income, RWT deducted, and imputation credits all flow into your end-of-year tax assessment:
- Interest and dividend income are added to your total income
- RWT and imputation credits are credited against your tax liability
- If credits exceed liability → refund
- If credits are less than liability → pay the shortfall
For most PAYE earners with small investment income, this is handled automatically by IRD’s automatic assessment.
Frequently Asked Questions
I earn $40,000 and have savings earning interest. What RWT rate should I nominate?
Nominate 17.5% — your marginal rate at $40,000 income. This matches your actual tax obligation and prevents both under- and over-withholding.
I forgot to nominate a rate. What happens?
Your payer defaulted to 33%. You will have an excess credit at year end (a refund for most middle-income earners). Going forward, log in and set your rate — you cannot change past withholding but can prevent it recurring.
Do PIE funds use RWT?
No — Portfolio Investment Entities (PIEs) use a different system called the Prescribed Investor Rate (PIR). PIE income is taxed inside the fund at your PIR (0%, 10.5%, or 28%), not through RWT. See PIE Tax NZ for details.
Does RWT apply to overseas investments?
No — RWT only applies to NZ-sourced income from NZ payers. Overseas investment income (interest or dividends from overseas) is handled differently — it is included in your income tax return and taxed at your marginal rate. Different rules apply for overseas shares under the FIF regime.