How Labour’s Proposed Capital Gains Tax Could Affect Kiwi Property Investors
The New Zealand Labour Party has recently made headlines by unveiling a major shift in tax policy: a proposed capital gains tax (CGT) on investment property, set to roll out if Labour wins the 2026 election. Here’s a closer look at who could be affected, what changes are on the table, and how property investors might want to prepare for the years ahead.
What’s on the Table?
Labour’s proposal would introduce a 28% capital gains tax on any profits made from selling investment properties—both residential and commercial—starting from 1 July 2027. This is designed to align with the existing company tax rate and would replace the current “bright-line test”, extending taxation from a window of just a few years all the way up to any future sale.
Who Will This Impact?
If you own investment property on 1 July 2027, these new rules apply to you—regardless of whether your asset is a rental house, commercial building, holiday home, or bach (provided it’s not your main family residence). Some key exemptions include family homes, farms, KiwiSaver, shares, business assets, inheritances, and personal items, which will not be hit by the new tax.
Key Implications for Investors
What should current and prospective property investors be aware of? Here’s a summary of the fundamentals:
-The valuation of each investment property must be established as of 1 July 2027. Labour has indicated that Inland Revenue will release guidance on acceptable methods, but details remain pending.
-Any capital costs added, or new properties acquired after 1 July 2027 need to be accurately tracked.
-When an investment property is eventually sold, the net capital gain (sale price minus original cost and capital improvements) will be taxed at a flat rate of 28%.
-If there’s a loss (your property sells for less than what you spent), that loss can be carried forward and used to offset future gains—but only within this category (i.e., against other property gains, not regular income).
Key Policy Points
Here are the main takeaways for property owners and investors:
-Existing property (not just new purchases) will be included if still owned after 1 July 2027.
-Family homes are exempt from CGT. However, it should be noted that, to qualify for this exemption, the property must have been the family’s principal place of residence for more than 50% of the ownership period, and more than 50% of the property’s total area must have been used as the main home.
-Farmland is exempt from CGT.
-The tax only targets the gain made after 1 July 2027—so any appreciation before that date isn’t taxed under the new rules.
-Other major assets (KiwiSaver, business interests, inheritances, and personal effects) are not impacted.
What Should Property Investors Do Now?
If you’re currently invested in property, or considering it, here are some steps to help you prepare:
–Talk to your accountant. Now’s the time to understand how the proposed policy might affect your portfolio—especially regarding how to value your assets and record improvement costs.
-Review your structures. Make sure your property holdings are set up in the most efficient way ahead of potential changes.
-Consider your timeline. If you’re thinking about buying or selling, factor in the new rules and timing.
-Explore alternatives. Check out other investment options that may suit your goals in a changing tax landscape.
Labour’s CGT proposal marks a major policy change intended to reshape investment incentives, fund essential services like healthcare, and address long-standing debates about fairness in New Zealand’s tax system. If you hold or are considering investment property, now is the time to start planning for what these changes could mean for you. Get in touch with us to explore how we can help you.