Some people could see a big jump in the amount of tax owed on managed funds such as KiwiSaver after the Inland Revenue detected about 450,000 people were paying the wrong tax rate.

Inland Revenue's new automated and digitised system introduced in April means it can identify the large number of people who were paying the incorrect prescribed investor rate (PIR) rates.

IRD is contacting the 450,000 who have not been paying the correct PIR on managed funds such as KiwiSaver over the next few weeks. Already 120,000 letters have been sent out.

Some people may owe more than in previous years and some may owe less.


"The new system means we can now more easily identify the correct PIR for each customer and advise them early to ensure they pay the right amount of tax as part of their income tax assessments," Inland Revenue spokeswoman Gay Cavill said.

"Consequently, some of these people may have had to pay a higher amount of tax this year than they were expecting."

In the past IRD relied on people selecting their correct PIR, but the new system meant they could check whether they had.

Cavill said there could also be refunds for people who had overpaid, but those details or the average bill amount could not be provided at this stage.

"It depends on the individual customers' circumstances overall as to whether they will get a bill or a refund."

According to the IRD's website, the PIR for residents is based on their income from the last two years. The prescribed guideline rates are 10.5 per cent for those earning a taxable income between 0 and $14,000, 17.5 per cent for those between $14,001 to $48,000 and 28 per cent for those earning more than $48,001.