October 5, 2026

Is there capital gains tax on commercial property in NZ?

NewsPropertyTax

Commercial property sales in NZ generally aren’t subject to CGT, but depreciation recovery (clawback of past depreciation claims) and GST can create significant tax bills on sale. The bright-line test may also apply in some cases.

Your agent is excited. The appraisal on your Tauranga industrial unit came back strong, and they want you to list next week. Then your accountant mentions something about depreciation recovery. In your head, the figures you were excited about earlier started to shrink. So, is there capital gains tax on commercial property in NZ? Not as a standalone tax. But a sale can still show up on your tax return.

Quick summary

The quick answer is no. New Zealand doesn’t have a general capital gains tax. The gain on a commercial building you’ve held long term is usually tax-free. The tax usually comes from three other sources. These can be from depreciation recovery on past claims, GST if the sale isn’t zero-rated correctly, and income tax if you bought with the intention to resell. The bright-line test rarely applies when land is used mainly as business premises rather than residential land.

Do you pay capital gains tax on commercial property in NZ?

Unless you bought a property with plans of reselling it, you usually don’t pay tax on the gain. It doesn’t have to be the only reason, either. If resale was one of the reasons you bought, the profit is taxable.

Stricter rules apply to people who buy and sell land as a business, or who develop or build on it. For them, land sold within 10 years of purchase can be subject to tax.

Commercial property tax NZ: a snapshot to help see if the gain is taxed

Your situation	Is the gain taxed?
You held it as a long-term commercial property investment	Usually not, so the gain is tax-free
You bought it intending to resell, even partly	Yes, the profit could be taxable income
You or an associate deal in or develop land, and sell within 10 years	Yes, in most cases
The land is residential, not business premises, and you sell within 2 years	Possibly, under the bright-line test

Even a tax-free gain can still bring depreciation recovery and GST. That’s where most of the tax on selling commercial property NZ owners pay comes from.

Depreciation recovery on commercial property explained

Depreciation recovery is income tax on past depreciation, triggered when you sell a building or fit-out above its tax book value. It’s capped at the depreciation you claimed, not the full gain.

From the 2020-21 income year, owners could claim 2% diminishing value or 1.5% straight-line depreciation on commercial buildings. The rate dropped back to 0% from the 2024-25 income year. Those four years of claims haven’t gone away.

Your fit-out is separate. Electrical cabling, fire protection and non-structural walls are still depreciable, so they can carry recovery too. The same goes for the 20% Investment Boost deduction on a new commercial building, which depreciation recovery can claw back on sale.

Here’s how depreciation recovery on sale of a commercial building works. Say you bought the unit in 2019, with $1,200,000 allocated to the building. You claimed 1.5% straight-line depreciation for four years, then sold in 2026.

Step	Amount
Building cost	$1,200,000
Depreciation claimed (1.5% for 4 years)	$72,000
Tax book value at sale	$1,128,000
Sale price allocated to the building	$1,350,000
Depreciation recovery (capped at the amount claimed)	$72,000
Tax at the 28% company rate	$20,160
Tax at the 39% top personal or trustee rate	$28,080

The gain of $150,000 above cost isn’t subject to tax. But $72,000 is. This is worth knowing before you commit to a sale price.

How GST works on a commercial property sale

Most commercial property sales between two GST-registered parties are zero-rated, so GST is charged at 0% instead of 15%. Most asset sales that include land and buildings should be zero-rated for GST.

Zero-rating is compulsory when these conditions are met at settlement:

You’re GST registered, and the sale includes land.
The buyer is GST registered and will use the property for taxable supplies.
The buyer isn’t buying it as a home for themselves or a relative.

Say your company owns a Tauranga industrial unit, leases it to a tenant, and is GST registered. You agree to sell it for $1,500,000 to another GST-registered investor, who’ll keep leasing it out. Every condition is met, so the sale is zero-rated.

What happens	Zero-rated sale	If GST at 15% applied
GST on the sale	$0	$225,000
Price stated “plus GST (if any)”	Buyer pays $1,500,000	Buyer pays $1,725,000
Price stated “GST inclusive”	You keep $1,500,000	You keep $1,304,348, and $195,652 goes to IRD
What you return in your GST return	The sale as a zero-rated supply	GST on the full sale price

Now consider if the buyer isn’t GST-registered, the conditions aren’t met and GST at 15% applies. Whether you or the buyer will bear the cost depends on how the price is determined.

This is the reason why sale and purchase agreements include a GST statement. Both parties need to confirm their registration and how the buyer intends to use the property. Review these early on in any property transaction.

Does the bright-line test apply to commercial property?

Rarely. The bright-line test only taxes residential land, and land used predominantly as business premises isn’t residential land. For residential land sold from 1 July 2024, the bright-line period is two years.

Most commercial property bright-line questions have a short answer. Two situations need a closer look:

a building with a flat upstairs, where the residential use is the main use
bare land zoned for housing, even if you planned to build a shop on it.

Our bright-line test guide covers the start date and the bright-line rules in full. Here’s how a commercial building compares with a residential rental property. If you’re thinking about where to invest eventually, our guide on what to consider when deciding to invest in residential or commercial property covers it.

Tax rule	Residential investment property	Commercial property
Bright-line test	Applies if sold within 2 years	Generally doesn’t apply
Ring-fencing of losses	Applies to residential rental properties	Doesn’t apply
Interest deductibility	Fully deductible since 1 April 2025	Fully deductible
Building depreciation	0%	0% since the 2024-25 income year
Rental income	Taxable	Taxable

What could change after the 2026 election?

Labour’s 2026 election policy proposes a 28% capital gains tax on commercial and residential investment property. What it means is that, if it ever comes to pass, it would only tax gains made after 1 July 2027, and only when a property is sold.

But bear in mind that is just a possibility and isn’t set in stone as a law. It will only be the case if a new government legislates it after the 7 November 2026 general election. Until such time, the current tax rules are still in effect.

See our guide to Labour’s capital gains tax proposal to understand its implications better.

What you need to remember before you list your commercial property

Ask for clear answers about your depreciation recovery and about your GST position before zeroing in on any commitment. The following checklist covers the selling commercial property tax implications NZ owners most often miss. Do the following as for good measure:

Be sure to check your tax returns and fixed asset register. Every depreciation claim on the building and fit-out should be on record.
Complete your GST statement carefully. Do so by confirming your GST status and that of the buyer.
Agree the purchase price allocation for tax purposes in the agreement itself. On sales of $1 million or more, the seller otherwise has 3 months after settlement to set it.
Note your original reason for buying, and whether anyone associated with you develops land.
Get professional advice. Early tax advice costs less than a pricey fix after settlement.

If you’re selling a business that trades from the same building, our guide to selling a business in NZ can provide additional guidance.

Frequently asked questions

Is there capital gains tax on commercial property in NZ?

No, New Zealand doesn’t have a general capital gains tax. The gain on a commercial building you’ve held long term is usually tax-free.

Is there a capital gains exemption on the sale of commercial property?

Since there’s no capital gains tax to be exempt from right from the start, there’s no formal exemption. Such gain is usually tax-free, especially if you bought it with the intent of holding on to it for the long term. It becomes taxable if you bought it with the intent to sell.

Do you pay GST on the sale of a commercial property?

Usually not, because most sales between GST-registered parties are zero-rated at 0%. If the zero-rating conditions aren’t met and you’re registered, GST at 15% can apply.

How much is GST on commercial property?

GST is 15% when it’s charged, but most sales between registered parties are zero-rated. On a $900,000 sale that isn’t zero-rated, GST would be $135,000.

Do you still claim depreciation on commercial property?

Not on the building, because commercial building depreciation is 0% from the 2024-25 income year. You can still claim depreciation on commercial fit-out, such as electrical cabling.

How to calculate depreciation recovery?

Subtract the asset’s tax book value from the sale price allocated to it. Your recovery is that difference, capped at the depreciation you claimed, and it’s added to your taxable income.

What is the depreciation rate for commercial property?

The rate for commercial buildings is 0% from the 2024-25 income year. Between 2020-21 and 2023-24, it was 2% diminishing value or 1.5% straight line.

How Ingham Mora can help with your sale

Selling commercial premises in the Western Bay of Plenty shouldn’t end with a tax surprise.

As the Bay of Plenty’s leading independent chartered accounting firm, we’ve supported local owners for over 60 years. Our tax team can model your sale and identify everything that’s taxable, including depreciation recovery.

Whether it’s a Tauranga industrial unit or a Mount Maunganui shop, you’ll get the exact, clear figures before you list.

See how we support property investors with our tax planning and management service.

Book a free chat whenever you’re ready – no pressure. We’re here to listen to your situation, and it will always be your call on how to proceed after that.