Resident Withholding Tax (RWT) is a tax applied to the interest and dividends you earn from your bank accounts and investments, both in New Zealand and overseas. It is deducted at the source, meaning your bank or investment fund manager withholds the tax before making a payment to you.
How RWT Works
RWT is applicable to two main types of income:
Interest Income – If you earn interest from savings accounts, term deposits, or other investments, your bank will deduct RWT before paying you the remaining interest.
Dividend Income – If you receive dividends from shares or other investments, the company distributing the dividends will deduct RWT before making the payment.
This system ensures that tax obligations are met in advance, reducing the need for individuals to manually calculate and pay taxes on these types of income.
Why RWT Matters
- Ensures compliance with tax obligations without requiring extra effort from taxpayers.
- Prevents underpayment of taxes on investment earnings.
- Helps manage cash flow by spreading tax payments throughout the year instead of lump-sum tax payments later.
If you receive interest or dividends, it's essential to check whether the correct RWT rate is applied based on your tax status. You can update your rate through your bank or investment provider if necessary.
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