A witness to a plane crashing into Lake Taupo was surprised there were no deaths.

A pilot is being praised for his quick thinking which ensured 12 skydivers escaped virtually unscathed when their light plane plunged into Lake Taupo today.

About 12.15pm the bright pink aircraft crashed 200 metres from shore at Rotongaio Bay, on State Highway 1 south of Taupo, sinking in 3.5m of water.

Remarkably, none of the 13 onboard who were forced to leap for their lives - the pilot, six crew members and six passengers - were injured.

Fairfax NZ Tumanako Wall, a 65 year-old retired plumber from Rotongaio, was piling up wood by the lake near Rotongaio Rd when he heard the bang.

"Where the pilot is concerned I can't praise the guy enough," Skydive Taupo chief executive Roy Clements told SunLive.

"He had to deal with the worst nightmare really for a pilot, what appears to be an engine failure. As a result he's told everyone to get out of the plane, and he's followed his own advice."

Clements said the experienced pilot was a new employee who had recently completed his induction training and began flying with the company in November.

1 of 7 Mike Scott Police divers enter the water of Lake Taupo to prepare the plane wreckage from yesterday's crash to be removed. 2 of 7 A witness to a plane crashing into Lake Taupo was surprised there were no deaths. 3 of 7 MIKE SCOTT/Fairfax NZ INTENSE: Mike Hawker, of Auckland, was a witnesses to a skydiving plane crashing into Lake Taupo. All occupants of the plane survived 4 of 7 SUNK: The plane lying underwater after crashing into Lake Taupo. 5 of 7 Robert Steven Taupo deputy coastguard Alex Dickie. 6 of 7 Skydive Taupo director Roy Clements expresses the relief he felt getting a phone call from his pilot after the company plane crashed into Lake Taupo yesterday. 7 of 7 Robert Steven The stricken aircraft entered Lake Taupo near where the harbourmaster's boat is located. The water was 3.5m deep, and it sunk.

He was with family this evening and taking a couple of days to recuperate, Clements said.

The instructors were "having a debrief at a local pub", while the passengers had left, possibly heading out of town to their next destination.

"We spent a lot of time with them after the police interviewed them and victim support," he said.

A witness to a plane crashing into Lake Taupo was surprised there were no deaths.

"They spoke highly about our staff, as they did about them."

Clements said the engine failed shortly after take-off as the aircraft began to climb to jump altitude of about 10,000 feet. The engine stopped at 2000 feet, forcing all onboard to exit the plane by parachute.

He told SunLive all the parachutists landed on land - rather than in water - while the pilot steered the plane into the lake. However, witnesses have reported seeing the skydivers land in the water, where boaties rushed to assist them.

The pilot landed in blackberry bushes close to the lake, and had to be cut free by firefighters.

Clements said both his staff and the passengers had remained calm through the ordeal.

"All the guys' training, their emergency procedures were utilised on this occasion. That's why they are walking around today."

READ MORE: Plane crashes into Lake Taupo

The Transport Accident Investigation Commission said a three-person team had this afternoon interviewed the pilot and the operating company, and collected the aircraft's records.

Interviews with the crew members and passengers, plus witnesses, would take place tomorrow, and the wreckage would be removed.

"During the morning police divers will photograph the wreckage that is lying in shallow water," general manager for communications and investigation support Peter Northcote said.

"The aircraft appears to have broken into several large pieces on impact with the lake."

Later in the day the wreckage would be lifted by helicopter before being transported to the commission's Wellington facility for further examination.

PUFF OF SMOKE

Witness Mike Hawker, a 24-year-old bar worker from Auckland, watched from his lakeside holiday spot at Waitahanui as the plane came spiraling down.

"We were just filling up the gas tank when we heard the putt from the plane come out and a puff of smoke was just coming out the back," he said.

"The plane was just gliding and six parachutes just popped out and the plane just took a nose dive and crashed straight into the water."

The impact was so severe, he thought there may have been casualties.

"When we got out in the boat it was actually quite intense, especially seeing the helicopters circle around, you think there is a body in the water."

Local resident Tariao Nahi-Cramer, 26, was at the beach celebrating her daughter's sixth birthday when she noticed the plane flying lower than usual.

"We saw all of them jump out really quickly at a really low height. Then we saw the last fella fall out of the plane," she said.

"I saw the plane and thought, 'oh my god, it's going to crash into the hillside. Then it did a real sharp turn and crashed into the water.

"I saw the huge splash."

While the incident had "freaked" her out, Nahi-Cramer was full of praise for the pilot.

"Whatever he did, he did a good job because he got the people out safe - they landed in the water, they didn't crash into the ground."

The wreckage is expected to be lifted from the lake bed tomorrow, and the Transport Accident Investigation Commission was commencing an investigation, which could take up to 18 months.

Clements said he hoped Skydive Taupo would resume its operations tomorrow. One News reported all passengers involved in the accident had been offered a free skydive.

Just an hour before the accident, the company had invited Kiwi popstar Lorde, who is on holiday in Taupo, to join them for a free skydive.

It tweeted: "Ella, you've sampled our lake, now how do you fancy seeing its true beauty from 15,000ft?!"