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Investors need to think about returns differently

The Southland Building Society (SBS) has launched a tax efficient cash fund.

Thursday, March 13th 2008, 9:21AM
The SBS Lifestages Deposit Portfolio invests in SBS term deposits and is part of its Funds Administration New Zealand (FANZ) Lifestages range of unit trusts.

FANZ executive director Graham Duston says the new portfolio is suitable for conservative investors who want to invest via a PIE structure.

Duston believes that the benefits of the PIE taxation regime for investors on an ongoing basis had been overshadowed by the introduction and debate over the benefits of joining KiwiSaver.

"The debate over the past six months has focussed on the immediate benefits for Kiwis when joining KiwiSaver.

"However, many Kiwis may find that the ongoing benefits of the PIE tax regime within PIE managed funds and KiwiSaver funds may also prove to be financially advantageous over time."

From April 1 the top tax payable on income in a PIE fund will reduce to 30%. As this tax is a final tax there will be tax savings for investors who are now taxed on 33% or 39% marginal tax rates. Some investors will be able to generate up to $60,000 in income and still be taxed at a marginal tax rate of 19.5%, depending on their circumstances.

Duston says the key issue around PIEs is that it will require a change in investor behaviour.

"Investors will now have to focus on net returns not gross returns under PIE. This is a massive change of behaviour from where we have previously been."

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