RWT (Resident Withholding Tax)
Tax automatically deducted from your bank interest and dividends. Your bank withholds it before you see the money. Rate depends on your income (10.5% to 33%). Check your rate is correct with IRD.
Resident Withholding Tax (RWT) is the tax your bank automatically deducts from your interest earnings and dividend payments before they hit your account. It's called 'withholding' because the bank holds it back and pays it directly to IRD on your behalf.
Your RWT rate depends on your income: 10.5% (income under $14,000), 17.5% ($14,001-$48,000), 30% ($48,001-$70,000), or 33% (over $70,000).
It's crucial to check that your bank has the correct RWT rate on file. If it's too high, you'll overpay tax (you can claim it back, but it ties up your money). If it's too low, you'll get a tax bill at the end of the year.
Why this matters
Many New Zealanders have the wrong RWT rate and don't know it. This either means they're overpaying tax on their savings interest (getting less money) or underpaying (and facing a surprise tax bill). Log into your internet banking, find the RWT rate section, and check it matches your income level. It takes five minutes and could save you money.
Related Tax terms
PAYE (Pay As You Earn)
Income tax deducted from your salary by your employer each pay period. Most NZ employees don't need to file a tax return because PAYE handles it.
Tax Code
A code that tells your employer how much tax to deduct from your pay. Most people are on 'M' (main income). If you have a second job, use 'S' or 'SH'. Wrong code = surprise tax bill.
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