What If NZ Introduced Capital Gains Tax in 2026?

New Zealand’s lack of a capital gains tax is an anomaly on the global stage. Unlike Australia, the UK, or most other OECD countries, Kiwi investors don’t currently pay tax on capital gains from property—unless captured under specific rules like the bright-line test or property flipping.

Despite repeated discussions since as far back as 2006, CGT has never gained political traction. Yet with over $20 billion lent to property investors in the past year alone, the potential tax take is significant. If NZ followed Australia’s system—where gains are taxed at the marginal income tax rate with a 50% discount for assets held longer than 12 months—the government could theoretically rake in hundreds of millions annually.

One argument for introducing a capital gains tax in 2026 is to cool property speculation and rebalance investment into more productive parts of the economy. However, the hosts argue that the property market’s challenges are supply-driven, not tax-driven. Interest deductibility changes, foreign buyer restrictions, and other interventions haven’t resolved the affordability crisis.

Instead, they warn a capital gains tax could distort behaviour. Investors may hold onto assets longer, reduce sales activity, and funnel money into owner-occupied “McMansions” to sidestep tax. Others may restructure holdings via trusts or alternative assets to avoid tax altogether—especially if complex legislation rewards those who can afford sophisticated advice.

New Zealand’s current tax framework is relatively simple—broad-based and low-rate—and this is seen as a strength. Adding a capital gains tax, especially if it’s poorly designed, risks introducing complexity that disproportionately impacts everyday Kiwis and small business owners.

For example, many people rely on selling small businesses to fund retirement. A CGT that also applies to business sales, vehicles, or artwork could have unintended consequences far beyond housing. And while a well-designed CGT could replace less efficient taxes like interest deductibility restrictions, there’s scepticism that it would be implemented with such clarity or discipline.

The hosts largely agree on one thing: if capital gains tax is introduced in New Zealand, it’s no longer a question of if—but when. A future Labour-Green government seems the most likely to push it through, and they may follow Australia’s model to keep it simple.

If implemented, expect a rush of market activity before the change: valuations, sell-offs, and strategic moves to avoid tax on future gains. What follows may be a long period of stagnation, with fewer transactions and reduced mobility in the housing market.

• New Zealand is the only OECD country without a comprehensive capital gains tax.

• A CGT could raise revenue, but may distort investor behaviour and slow market activity.

• A simple, well-designed tax could be more effective than recent complex rules like interest deductibility restrictions.

• CGT isn’t a silver bullet for housing affordability—it won’t solve supply-side issues.

• Wealthier individuals may find ways around a new tax, while everyday investors shoulder the cost.