A Portfolio Investment Entity (PIE) is a type of investment vehicle that is able to pay tax on behalf of its investors, and depending on the ‘prescribed investor rate’ chosen, the tax liability on the income is able to be capped at 28%. This can be a material benefit to investing in a PIE – depending on the circumstances of a specific investor.
When the top personal marginal tax rate increased to 39% and the income tax rate for trusts subsequently increased to 39%, there was a natural expectation that the income tax rate for PIEs would also increase. It became a common topic of conversation.
To date, there has been no indication that the top tax rate applying to investors in PIEs will change and hence investments into PIEs continue to receive a comparative tax benefit of potentially 11%, being the difference between the capped rate of 28% and the top rates of 39%. That has also given rise to an increase in the number of banks and fund managers that provide PIE investment products.
It is worth bearing this in mind the next time consideration is being given to making a passive investment and comparing the post-tax yields between the various options.