NZ Capital Gains Tax: Labour's Plan and What's Already Law

• What is a capital gains tax?
• Does NZ already have a capital gains tax?
• Labour’s capital gains tax proposal
• The case for a capital gains tax in NZ
• The case against a capital gains tax in NZ
• I own property - what should I do?

A capital gains tax is a mandatory charge levied by the government on profit made when selling an asset.

In New Zealand we tend to associate capital gains tax with property, but they often apply to many different types of assets – like shares, crypto, bonds, managed funds, businesses, business assets, vehicles, and collectibles like art.

Yeah, na. Sorta. New Zealand already has a quasi-capital gains tax called the bright-line, which was introduced in 2015 (by the National government at the time, funnily enough). The reason it’s a ‘quasi-capital gains tax’ is because it only applies to properties bought and sold within two years (although it used to be five years, and 10 years)

The bright-line is charged at your marginal tax rate, meaning the more you earn, the more you pay.

Read a full guide to the bright-line Test

There are also other tax laws that function like a capital gains tax in NZ.

These laws may apply to you if:

• You’re in a pattern of buying and selling property for profit
• You bought the property with the intention to sell
• You’re associated with the business of property dealing, developing, or building (i.e. you’re a builder, property developer, or you’re closely connected to someone who does).

Generally the above rules don’t apply to your main home, except if you do not use the property as your primary residence for a period of more than 365 consecutive days.

The key takeaway here is – if you’re outside the bright-line that doesn’t necessarily mean you won’t pay tax on your property’s sale. Other taxes may apply.

A less limited capital gains tax is one of Labour’s headline policies for the 2026 election. If current polling is anything to go by, there’s a 50/50 chance they’re elected, so it’s worth understanding their proposal.

Labour’s capital gains tax details

• Applies only to commercial property and residential investment properties, and only on gains made when properties are sold.
• The family home is exempt. So are farms, inheritances, KiwiSaver, shares, businesses, and personal items.
• Starts on 1 July 2027. Only profits made after this date are taxed.
• The rate is 28%, the same as the company tax rate.

The tricky thing about this tax is that it only applies to gains after 1 July 2027, so property owners will need to know the value of their property on that date. A valuation on that date may be necessary – and the gap between this valuation and the eventual sale price will be taxable. Losses are ring-fenced, meaning if you sell property at a loss, you can’t offset that against other income, such as your salary (but you can carry it forward against future capital gains).

Here’s an example of how the tax might work directly from Labour’s website:

“A commercial building is purchased on 1 July 2025 for $400,000. On 1 July 2027 it is valued at $600,000, and it is later sold for $700,000. The tax applies only to the $100,000 gain after 1 July 2027.”

• New Zealand is over invested in housing. We need to focus investment on more productive sectors, like businesses, and a CGT will help change behaviour - by reducing incentives to invest in housing.
• Treats all income fairly. Working people are taxed up to 39% for their labour, whereas capital gains from property often aren’t taxed at all. The idea is that all sources of income should receive the same tax treatment so that our tax system is equitable (and so that wealthier property investors aren’t unfairly advantaged).
• May help housing affordability. If the government takes a chunk of your profit every time you sell a property, in theory you’ll be able to pay a bit less for the next one. You’ll also be less incentivised to buy speculative properties since you can’t keep 100% of profit. New Zealand has one of the least affordable housing markets in the world, so this is a strong argument for a CGT.
• It’s the norm. Almost every OECD country has a general capital gains tax — New Zealand is one of the few that doesn't. This law merely brings us closer in line with comparable nations.

There are two cases to be made against the Labour Capital Gains tax in NZ. One is made by those who oppose capital gains tax generally, and the other is made by those who support a capital gains tax but don’t support the details of labour’s plan.

• They’re not a silver bullet for house prices: places like Sydney, Vancouver, and Los Angeles have capital gains taxes, yet they’re some of the most unaffordable markets in the world.
• It locks investors in: since investors are taxed when they sell, they simply don’t sell – they either defer or completely avoid the sale so they don’t pay the tax.
• Compliance costs will increase: they say the main winners when new tax law is introduced are accountants and lawyers. Capital gains taxes may increase compliance and valuation costs for property investors and commercial property owners.

• It doesn’t account for inflation: In the five years to October 2025 house prices went up 10%, while inflation increased by 25%, according to the NZ Property Investors’ Federation. If this tax had been law during this time investors would have paid taxes on a nominal gain, while suffering a real loss.
• It’s not a progressive tax: this capital gains tax is levied at the company tax rate of 28%. Someone earning $300,000 a year pays the same 28% rate as someone earning $50,000 — unlike income tax, which scales with earnings.
• It’s a narrow, property-only tax: critics argue that all assets should be captured by the capital gains tax – as they are in most other OECD countries. That includes shares, businesses, and collectibles.