What you need to know when making your voting choice in 2026
After months and months of speculation about whether or not Labour would run on a Capital Gains Tax (CGT) policy at the next election, they’ve finally made a decision: A special CGT, just for property investors. It doesn’t feel great to be singled out for special tax treatment, but it could be worse.
First the good news. They haven’t gone with their old policy of removing interest deductibility. Well not yet – they haven’t ruled it out either. I think it’s fair to say that most if not all property investors, if given the choice of CGT or removal of interest deductibility, would go with CGT. Its impact is limited, and it only kicks in when you sell and take – hopefully make – a profit.
The other positive is Labour propose taxing you on your net gains – minus any capital expenditure you’ve made on the property while you’ve owned it. Keep your receipts!
That’s where the good news ends. The worst thing about this tax is that it doesn’t account for inflation. That’s important in the current environment where capital gains are low. Here’s why. In the last five years, from October 2020 to October 2025, house prices have risen only 10%. In that same time, inflation went up 25%. Yes, you read that right.
If Labour’s tax had been in place over that time, you’d have made an effective capital loss of 15%, but you’d be charged tax on your nominal gain of 10%. That doesn’t seem particularly fair. In Australia, which has had a CGT for a while, once you’ve owned a property for more than 12 months you are only charged CGT on 50% of the capital gain. That’s to allow for inflation. Much fairer.
If Labour get to bring this policy in, they have said they’d start it from 1 July 2027. How it would work is that you would get your property valued at that date, and any net gain after that would be taxed, at 28%. If you make a loss you don’t get to claim it against other income, but it would be ring-fenced to claim against any other capital gains you get from housing in the future.
One of the worst things about this policy is the motivation behind it, which is revealed by the language used in the media release and the policy document*.
Labour thinks that property investors are unproductive speculators. The image they seem to have in their minds of a property investor is ‘Monopoly Man’, when the reality is more likely to be an average Kiwi man or woman in paint-splattered overalls. They don’t see us as hardworking people running a business.
Look at what their policy document says:
“New Zealand’s tax system currently rewards property speculation ahead of work and investment in innovative Kiwi businesses.”
Perversely, it goes on to say that Labour’s proposed tax:
“rewards work and productive investment … rather than speculation on multiple properties.”
These are people who clearly have never renovated a rental!
Here’s the other weird thing about the policy document. It doesn’t once mention the fact that investment properties are homes that people live in. There seems to be no connection in Labour’s mind between property investors owning a home, and that home being available for someone to live in. It seems like they think we just buy them and leave them empty waiting for the price to go up.
In summary, while it’s not the worst thing that could happen, this tax proposal is still unfair. It’s unfair because it singles out businesses providing rental accommodation, but no others. It will likely act as a disincentive over the long term to invest in providing rental accommodation. It is a truism that you tax the things you want less of – like smoking or drinking. In this case Labour is taxing rental accommodation. It doesn’t make sense. Surely, we want more homes for people to live in?
What should you do?
Well, you could write to your nearest Labour MP. Tell them about your property investing journey, the hard work you’ve put in to improve your property and provide a home for other Kiwis to live in. Remind them that property investing isn’t a passive activity, it’s actually a business and it requires hard work. Remind them that buying an old home and doing it up or buying a new-build are both productive activities! Both activities contribute to economic and social wellbeing.
Apart from that, do nothing. Labour isn’t in government yet. Wait until after the election before deciding what steps to take with your rental portfolio, whether it’s one or one hundred. Watch, wait – and think very carefully about how you’re going to vote.
* If you follow the link to their policy, don’t be confused if you think we’ve sent you to the health policy page. That’s because Labour is promising all money raised from this tax will go toward funding free doctor’s visits, and they want people to focus on that. A cunning ploy! Scroll down the policy for the tax details.