Tax on retirement savings in NZ: PIR, interest, rent and part-time work

Retirement income is taxed in several different ways, and getting the settings right can save you hundreds of dollars a year. NZ Super is taxable income; Work and Income deducts the tax. KiwiSaver and managed funds are taxed inside the fund at your prescribed investor rate (PIR): a single person on NZ Super alone has taxable income of $33,663 a year, so 17.5% is usually the right PIR, not the 28% default. Interest, rent and part-time wages sit on top of NZ Super and are taxed at your marginal rate, which for most retirees starts at 17.5%. This guide works through each with this site's tax engine, using 2026/27 rates. Rules checked 12 November 2026.

NZ Super is taxable income

NZ Super is taxed like a wage. The law sets the after-tax rate, and Work and Income deducts the tax before paying you. From 1 April 2026 a single person living alone gets $1,294.74 a fortnight before tax, or $1,110.30 after tax at the M code. Over 26 fortnights that is $33,663.24 a year of taxable income. Each partner in a couple gets $984.28 before tax, or $25,591.28 a year.

That taxable income matters because it decides your PIR, your RWT rate and the secondary tax code on any job. It uses up the 10.5% bracket (to $15,600) and part of the 17.5% bracket (to $53,500), so extra income for most retirees starts at 17.5%.

NZ Super carries no ACC earners' levy, and it is not income tested for you personally: working or earning interest does not reduce it. An overseas pension can reduce it, though. Our NZ Super and tax guide covers tax codes in detail.

KiwiSaver and PIE funds: choosing your PIR

KiwiSaver and most managed funds are portfolio investment entities (PIEs). The fund pays tax on your share of its income at the PIR you give it, and that tax is generally final. Inland Revenue's IR861 (March 2026) sets the test for individuals, using either of your last two income years:

What this means on NZ Super

• 10.5% is out of reach for anyone getting a full year of NZ Super, because NZ Super alone is more than $15,600.
• 17.5% applies to a single person living alone on NZ Super alone as long as their PIE income is no more than $44,436.76 a year ($78,100 less $33,663.24). For each partner in a couple it is $52,508.72.
• 28% applies once other taxable income is large. A single person with NZ Super plus $25,000 of other taxable income has $58,663, over $53,500, so 28% is correct.

PIE income is your share of the fund's taxable income for the year, not the amount you withdraw. On $10,000 of PIE income, 17.5% is $1,750 of tax and 28% is $2,800, a difference of $1,050 a year.

If your PIR is too high, Inland Revenue works out the right rate after the year ends and credits the overpaid tax against other tax, refunding the rest. If it is too low, you pay the difference. It is still worth updating your PIR with your provider as soon as your income drops, which for many people is the year they stop work. Because of the two-year look-back, you can keep the lower rate if either of the last two years qualifies.

Withdrawals from KiwiSaver and funds

Because the tax is paid inside the fund as it earns, taking money out is not itself treated as income. The Retirement Commission's 2025 Review of Retirement Income Policies (page 68), summarising research it commissioned, describes drawing down KiwiSaver as "tax-free" and notes it "does not affect NZ Super entitlements".

That is one reason our calculators work with returns after fees and tax: the 2.5% a year we assume after 65 is the return after tax at 28%, according to the FMA. If you are on 17.5%, your real after-tax return will be a little higher. Sorted's KiwiSaver calculator shows about 0.2 to 0.5 percentage points more for 17.5% before 65; there is no official figure after 65, so we keep 2.5%.

Interest, rent and part-time work

Everything else is stacked on top of NZ Super and taxed at your marginal rate. For 2026/27 the brackets are 10.5% to $15,600, 17.5% to $53,500, 30% to $78,100, 33% to $180,000 and 39% above. Here is what our tax engine gives for a single person living alone on NZ Super:

Interest and RWT

Banks deduct resident withholding tax (RWT) from interest. Inland Revenue says your RWT rate "should match your income tax rate", based on total taxable income. On NZ Super plus modest interest that is usually 17.5%. If you have an IRD number but do not choose a rate, the bank uses 33%; with no IRD number it is 45%. RWT is a credit, not a final tax, so it is squared up at year end, but choosing the right rate keeps more money in your hands during the year.

Rent

Rental profit is taxable at your marginal rate, and individual owners file an IR3 return. Since 1 April 2025 interest on residential rentals is fully deductible again (IR264). Losses on residential rentals are ring-fenced: they cannot reduce tax on NZ Super or other income. In our calculators, enter rental income after costs; we tax it on top of NZ Super. See our downsizing guide if you are weighing a rental against releasing equity.

Part-time work and tax codes

If NZ Super is your largest income, it keeps the M code and the job takes a secondary code chosen from your total yearly income including NZ Super (IR330). NZ Super recipients cannot use the ME code. With $20,000 of wages, total income is $53,663, just into the $53,501 to $78,100 band, so the job uses SH. Our engine shows PAYE at SH of $121.92 a week on $384.62, or about $6,340 over a year, while the tax and ACC levy actually due are about $3,870. The roughly $2,469 difference comes back after the year ends, or you can ask Inland Revenue for a tailored tax code. With $10,000 of wages the S code gets it almost exactly right. Our working after 65 guide has more.

A tax checklist for retirement

1. Check your PIR with every KiwiSaver and PIE provider when you stop work, and each year after. Most people on NZ Super and modest savings should be on 17.5%.
2. Set your RWT rate with each bank to match your total income.
3. Give Work and Income the right tax code for NZ Super, and your employer the right secondary code, using total income including NZ Super.
4. Keep rental records and file an IR3 if you have rental income.
5. Check your year-end assessment in myIR each year after 31 March. Over-deducted tax is refunded.

Our calculators handle the tax for you: NZ Super at the legal net rate, and wages and rent taxed on top with the same PAYE engine as PAYE Calculator NZ. Try your own figures on the retirement pay calculator.

This is general information, not financial advice or tax advice. An accountant can help with rental property and mixed incomes.

Questions

What PIR should I use in retirement?

If your only other income is NZ Super, usually 17.5%. NZ Super alone takes you over the $15,600 limit for 10.5%, and you stay on 17.5% while taxable income is $53,500 or less and taxable income plus PIE income is $78,100 or less, in either of the last two years.

Are KiwiSaver withdrawals taxed after 65?

Withdrawals are not taxed as income, because tax is paid inside the fund at your PIR as it earns. The Retirement Commission's 2025 review describes drawing down KiwiSaver as tax-free.

Does part-time work reduce my NZ Super?

No. NZ Super is not income tested for you personally. Your wages are taxed on a secondary code chosen from your total income including NZ Super.

Why is so much tax taken from my part-time job?

If your total income lands just above $53,500, the SH code takes 30% from every dollar of wages even though only a little of your income is in the 30% bracket. The extra is refunded after the year ends, or you can ask for a tailored tax code.