Market Updates
Capital Gains Tax in New Zealand: What the Proposed Labour Policy Could Mean for You
Nov 4, 2025
The Labour Party has announced plans to introduce a new, targeted capital gains tax (CGT) focused primarily on investment property.
Unlike previous proposals for a broad-based CGT, this policy zeroes in on investment residential real estate — excluding the family home and farms. It’s one of the most significant tax debates New Zealand has seen in years, with implications for fairness, housing supply, and investor behaviour.
Here’s what we know, what’s still uncertain, and what it could mean for you as a homeowner, property investor, or overseas buyer.
What’s Being Proposed
Labour’s proposed CGT would apply to profits made when selling investment property. Key reported details include:
Tax rate: Approximately 28 % on gains made after the introduction date.
Start date: Proposed for 1 July 2027, allowing time for valuations and implementation.
Exemptions: The owner-occupied family home and farms are expected to remain tax-free.
Valuation day: Properties would be assigned a “base value” at the time of introduction; only future gains would be taxed.
Revenue use: Funds raised would help finance public services, such as free GP visits for New Zealanders.
This design is narrower than previous CGT proposals and seeks to balance revenue generation with protecting ordinary homeowners. Read our Buying Property in NZ as an Overseas Buyer article for more information on how NZ taxes differ internationally.
Why the Policy Is Being Proposed
Labour argues that New Zealand’s current tax system unfairly favours property investors, allowing them to realise untaxed capital gains while wage earners pay full income tax. Supporters of the policy frame it as a move toward tax fairness, while critics view it as a disincentive to property investment.
Key stated motivations include:
Fairness: To close the gap between how wages and investment gains are taxed.
Revenue: To help fund healthcare and other essential services.
Stability: To cool speculative demand in the housing market, easing pressure on prices over time.
New Zealand is one of the few developed countries without a general CGT, so the policy marks a potential structural shift in the tax landscape.
Who It Would Impact
Homeowners (Owner-Occupiers): If you own only your primary residence, you are likely exempt. The proposal explicitly protects the “family home.” However, if you own a holiday house, rental property, or second dwelling, any profit on sale after July 2027 could be subject to CGT.
Property Investors: This group is the primary focus of the tax. Investors will pay tax on profits when they sell investment property — calculated from the “valuation day” base value to the sale price. The effective tax rate of around 28 % would apply to that gain.
Example: If your investment property is valued at $800,000 on July 1 2027 and you sell it for $1,000,000 in 2030, your taxable gain is $200,000. At 28 %, that’s $56,000 in CGT.
Overseas Buyers and Non-Residents: The tax is expected to apply to NZ-sourced property gains regardless of your residency. Non-residents who sell NZ property after the valuation date could face CGT on those gains. This may affect investment returns and timing for overseas buyers considering entering or exiting the market.
Read our Australian, UK and Singapore buyers guides for more information on the current rules and how taxes impact overseas buyers.
Potential Benefits
Fairer system: Reduces disparity between earned income and untaxed capital gains.
Revenue for public services: New funding for health, housing, and education.
Reduced speculation: Could discourage short-term property flipping and speculative investment.
Market balance: May help moderate demand and stabilise housing prices over time.
Supporters argue that these effects could create a more sustainable housing market and make long-term ownership more accessible.
Potential Drawbacks
Reduced investor appetite: A tax on gains may discourage new property investment, potentially tightening rental supply.
Lower returns: After-tax yields for investors could fall, changing the economics of property investment.
Complexity: Implementing valuations, tracking improvements, and calculating gains add compliance costs.
Behavioural effects: Investors may delay selling or move funds to other asset classes, reducing liquidity.
Economic uncertainty: The overall effect on prices, rents, and investment confidence remains unclear.
Critics argue that without corresponding increases in housing supply, CGT alone may not fix affordability - it could simply shift incentives.
Impact on Key Stakeholders
Homeowners:
Minimal direct impact for single-property owners. However, if you own more than one property, review whether any could fall under investment classification. Keep clear records of acquisition costs, renovations, and valuations for future clarity.
Investors:
Begin preparing early. Track your property’s cost base, improvements, and likely value at the proposed July 2027 valuation date. Consider whether it makes sense to sell or restructure before the law takes effect. If you’re highly leveraged, factor in that your post-tax returns may decline.
Overseas Buyers:
If you’re holding or planning to buy NZ investment property, model your expected return after tax. Timing around the valuation date may influence your decision. If you’re planning a long-term hold, the impact may be limited — but if you intend to sell within a few years, the difference could be significant.
Read our When (and Why) You Should Refinance Your NZ Mortgage article, since refinancing decisions may shift under new tax expectations.
What to Watch Next
Valuation Day: Expected to be 1 July 2027, establishing the base value for all affected properties.
Legislation Details: The exact rate, exemptions, and treatment of losses have not yet been confirmed.
Political Risk: The proposal’s future depends on election outcomes and coalition negotiations.
Market Response: Investor behaviour may shift well before the tax is implemented, as buyers and sellers anticipate its effects.
Record-Keeping: From now on, property owners should maintain documentation for purchase price, improvements, and costs to ensure accurate future gain calculations.
Balanced View
A well-designed capital gains tax could bring fairness and long-term stability to New Zealand’s tax system, aligning it more closely with international norms. But if implemented poorly or too narrowly, it could create unintended consequences — such as reducing rental supply or distorting investment flows. The challenge for policymakers will be ensuring balance: protecting homeowners while not punishing responsible investors who provide housing stock.
What Homeowners and Investors Should Do Now
Review your property portfolio: Identify which properties might be subject to CGT.
Start record-keeping: Keep receipts, valuations, and renovation costs.
Plan timing: Consider whether selling, refinancing, or restructuring before 2027 makes sense.
Consult professionals: Engage a tax adviser and mortgage broker early.
Stay informed: Policy details may change — monitor official announcements.
Whether you’re a homeowner, property investor, or overseas buyer, the proposed capital gains tax will reshape parts of New Zealand’s housing and investment landscape. Understanding how it could affect your portfolio, returns, and future plans is critical.
Speak with one of our mortgage and property finance specialists today to assess your exposure, model potential outcomes, and prepare a proactive strategy ahead of any changes.
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