Debate over new capital gains tax policy persists

The debate over the Labour Party’s new capital gains tax policy has continued, sparking conflicts between Labour leader Chris Hipkins and New Zealand Prime Minister Christopher Luxon, according to 1News.

The Labour Party will be campaigning its policy on property at a rate of 28% from July 1, 2027, with the exclusion of family homes and farms. Hipkins said that the policy’s approach will only affect one in 10 New Zealanders, but the revenue will be used to help everyone receive three free doctor visits per year. 

However, the National Party has already begun to express its opposition through social media through a series of attack ads. 

In response, Hipkins stated that he would be open to debating Luxon regarding his personal finances, citing Luxon’s sale of four houses in the previous year, which made more money – tax free – than his salary as the prime minister.  

“Why should he be able to make more than $600,000 in one year from flipping properties whilst the people who go out and work hard every day for a living pay tax on every single dollar that they earn?” said Hipkins. 

Luxon (pictured above) responded by stating that he has not flipped properties and said that taxing New Zealanders should not be the action taken. 

“We want to grow Kiwi businesses, we want to back entrepreneurs that want to grow companies and build companies and actually, this is a tax on every single business in New Zealand,” said Luxon. 

A growing concern among property investors 

While the debate continues, property investors have aired their concerns over the policy taxing capital gains on residential and commercial investment properties, according to The Post.  

Nick Gentle, an investor based in Rotorua who runs a Facebook group for property investors, said that he does not believe that the policy would revolve around funding doctor’s visits or even addressing the problems in wealth inequity.

“Every time a particular group is targeted it is ideologically based. It’s not about raising revenue – because if it was, the tax would be applied to all capital gains, whether it’s from rental housing, farms or shares,” said Gentle.

Investor Nichole Lewis said that aside from the negative effect on people saving up for retirement, the policy may urge existing investors to stop adding to rental stock, or simply move to assets where gains will not be taxed. 

“Last time Labour made changes to investor tax rules, investors stopped buying. Many are still nervous those policies could return, and are just sitting back on their portfolio, or have gone into other assets,” said Lewis. 

Commercial and residential investor David Whitburn said it would be better to extend the bright line test instead. 

“The bright line test disincentivises people wanting to speculate, but doesn’t disincentivise long-term investment from people who want to provide much-needed rental properties,” said Whitburn. 

“There are other possible property tax options too, such as a land tax on foreign buyers, which is something many other countries do,” he added.