Capital Gains Tax: What New Zealand Property Owners Should Actually Do About It | NZ Legal

Capital gains tax is back in the headlines. Labour has announced a 28% CGT on investment and commercial property, due to start on 1 July 2027 — if Labour wins the November 2026 election. The political debate is loud. The practical question for property owners is quieter, and more useful: what, if anything, should we do now?

This is our take. We act for property owners every day, from first home buyers to families holding multiple investment properties, and our job is to give clients a clear view of the law and a clear plan.

What the current law actually says

As at May 2026, New Zealand has no general capital gains tax. If you sell a property or shares at a profit, that profit is not taxable simply because it is a gain.

The exception is the bright-line test . If you sell residential investment property within 2 years of buying it, the gain is taxed at your marginal income tax rate. The family home is excluded. The bright-line period was reduced from 10 years to 2 years on 1 July 2024. Full interest deductibility on residential investment properties has also been restored from the 2025/26 income year.

Outside the bright-line rules, there are longstanding income tax provisions that catch property bought with the intention of resale, and gains made by people in the business of dealing in or developing land. These are unchanged.

What Labour has proposed

Labour’s policy, as published on the party’s own website, is:

• Rate: 28%, aligned with the company tax rate.
• What is taxed: Commercial property and residential investment property, on sale, and only on the gain accrued after 1 July 2027.
• What is exempt: The family home (including lifestyle blocks), farms, KiwiSaver, shares, business assets, inheritances, gifts, and personal items.
• Small business carve-out: A small business that owns its premises and sells to move to a bigger one will not pay CGT on the sale.
• Start date: 1 July 2027. Existing owners get a base value equal to market value on that day. All gains before 1 July 2027 are protected.
• Where the money goes: Ring-fenced for healthcare, including three free GP visits a year.

The current government opposes the proposal. There is no draft legislation. Coalition negotiations after the November 2026 election may also reshape the design, particularly if Labour governs with partners who want a broader version.

The point that matters most: gains before 1 July 2027 are not taxed

This is the most misunderstood part of the policy. CGT in this form would not be retrospective. If you have owned an investment property for 20 years and it has gone up by $1 million, that $1 million is protected.

That mechanic — often called valuation day or V-Day — is standard for CGT regimes introduced prospectively. Australia did the same thing in 1985.

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Every dollar of gain you have already made is protected by the V-Day base value. You do not need to sell to lock those gains in. You already have them.

”Should I sell now to get out before CGT?”

This is the question we hear most often. Our view, in plain terms, is that selling purely to dodge a tax that may never exist — on gains that would be protected anyway — is usually the wrong call.

Reason to hold	Reason to sell
CGT may never happen	Labour has to win and legislation must pass	You were planning to sell within 1–2 years anyway
Pre-2027 gains are safe	V-Day base value locks in all existing gains	The property is underperforming and capital is better deployed elsewhere
Transaction costs are real	Commission, legal fees, break costs can exceed future CGT	You expect significant post-2027 gains and want simpler tax affairs
Re-entry risk	Selling and re-buying later means no V-Day reset	Complex trust structure where CGT uncertainty outweighs holding benefits

In other words: sell because the investment case has changed, not because of a tax that does not yet exist.

What you should actually do now

For most of our clients with investment property, there are three sensible steps to take in 2026 and into early 2027.

1. Step 1

   Get a registered valuation close to 1 July 2027

   This is the single most important thing. If CGT comes in, the V-Day valuation becomes the cost base for every future sale. A clean, recent registered valuation by a qualified valuer is the gold standard — council rateable values are not sufficient. If you cannot evidence the V-Day market value properly, you risk IRD assessing tax on a higher gain than you actually made.

   For families with multiple investment properties, this is a portfolio-level exercise, not a one-off.

2. Step 2

   Sort out your ownership structures before V-Day

   Property held in a trust, a look-through company, a partnership, or jointly between family members will each be treated differently under any CGT regime. The detail of how trusts will be treated is not yet clear from Labour’s announcement — but what is clear is that restructuring after V-Day is far harder than restructuring before. If you are sitting with structures that no longer match your family’s situation, deal with that now.

3. Step 3

   Think about which property is 'the family home'

   If your family owns more than one home, only one is likely to qualify as the exempt family home at any given time. For families with a city home and a holiday home, or two homes used at different times of year, the nomination decision can have real tax consequences. It is worth thinking about now and revisiting once the policy design is final.

Genuinely open questions

To be straight with you, there is plenty Labour’s announcement does not yet answer:

• How trust-held investment property is treated, including on resettlements and distributions.
• The exact definition of “family home” where someone owns more than one.
• What evidence of V-Day valuation will be required by IRD.
• How losses on post-2027 sales can be used.
• How properties that change use (for example a former rental that becomes the family home) are treated.

These are the points that draft legislation — if it happens — will have to fill in. We will update our advice as the detail firms up.

How we can help

NZ Legal acts for property owners across New Zealand, from first home buyers to families with multiple residential and commercial holdings. If you would like a conversation about your portfolio in light of the proposed CGT, we can help with:

What to do before 1 July 2027

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1. Review your current ownership structures with a lawyer and identify where pre-V-Day restructuring is worth considering
2. Commission registered valuations for all investment properties close to 1 July 2027
3. Confirm which property is your family home and document the basis for that nomination
4. Review any trust deeds where the trust holds investment property
5. Get sell-or-hold analysis for any properties you are considering selling, including bright-line and structuring implications
6. Revisit your plan once draft legislation is published — the detail will matter

Reset

Get in touch and we will give you a clear view and a clear plan — no jargon, no pressure.

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This article is general information about a proposed change to New Zealand tax law as at May 2026. It is not legal or tax advice and is not a substitute for advice on your own situation. Tax matters in particular should be confirmed with your accountant or tax adviser. The policy described is a proposal only and is not law.

Sources

1. Inland Revenue — Bright-line test for residential landCurrent bright-line rules, reduced to 2 years from 1 July 2024.
2. Income Tax Act 2007 (New Zealand)Primary legislation governing income tax, including property-related provisions.
3. Property Law Act 2007 (New Zealand)Governs property transactions and ownership structures in New Zealand.