How much is a capital gains tax in nz?

New Zealand doesn’t technically have a Capital Gains Tax. It sort of does, but it doesn’t.It’s called the bright-line property rule, and it’s New Zealand’s lite-version of a Capital Gains Tax.In a nutshell, if you sell a residential property you have owned in New Zealand for less than 10 years you may have to pay income tax on the gain.The bright line test is halved from 10 to 5 years for all newly built properties.This means investors avoid paying a blanket tax on the capitals gains for properties they sell, provided they don’t sell before 5 years

How do I avoid capital gains tax in NZ?

Property owners will have to pay income tax on any capital gain if you:Bought your property on or after March 27 2021, and sell within the 10-year bright-line periodBought your property between March 29 2018 and March 26 2021, and sell within the 5-year bright-line periodBought your property between October 1 2015 and March 28 2018, and sold within the 2-year bright-line period.So, if you want to avoid paying tax on your property under the bright-line test, you will have to sell your property outside of these time periods.

How long do you have to live in a house to avoid capital gains tax nz?

Before the 2021 changes to the bright-line test came in, a property was considered your main home if you lived in it more than 50% of the time.So if you lived in it for 2.5 years and rented it out for 1.5 years, you wouldn’t have to pay any tax. This is no longer the case and its called the “change-of-use” rule.Let’s say you bought a property this year, and in 6 years, you go to sell it. The property has a 10-year bright line test.If, during that time you rented the property out for 2 years while you lived overseas, you will now pay tax on the time it was a rental.

Tax

12 min read29 Oct 2025

Does New Zealand have a Capital Gains Tax?

Understand New Zealand's capital gains tax rules. Learn what’s taxed, what’s not, and how it affects you.

Author: Ed McKnight

Resident Economist, with a GradDipEcon and over five years at Opes Partners, is a trusted contributor to NZ Property Investor, Informed Investor, Stuff, Business Desk, and OneRoof.

Reviewed by: Laine Moger

Journalist and Property Educator, holds a Bachelor of Communication (Honours) from Massey University.

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New Zealand doesn’t have a formal Capital Gains Tax, at the time of writing.

However, we still tax capital gains from residential property – through the bright-line test.

That said, Labour recently announced plans to introduce a Capital Gains Tax (CGT) if they win the next election.

This news has reignited debate among both investors and everyday Kiwis.

Some property investors worry about the government introducing a CGT. But, on the other side of the social spectrum, some Kiwis worry that the government won’t.

In this article, you'll learn what a Capital Gains Tax is — and how it could affect property investors if Labour's proposal goes ahead.

Do you have a question or comment about Capital Gains Tax? Feel free to leave your thoughts in the comment section at the end of the page.

Does NZ need a Capital Gains Tax? The debate for and against⎥Ep. 1859⎥Property Academy podcast

What is a Capital Gains Tax?

A capital gains tax is a payment made to the government. It’s a tax you pay when you sell an asset for more than you bought it for.

Let’s say you bought a single share in Apple Inc (a technology company) at the end of 2010.

At that point you would have paid about $16.

Ten years later, that share would have been worth about $182.

In this case, your asset (the share in the company) has increased in value by $166.

That difference in value is a capital gain. It’s also sometimes known as capital growth.

If there was a capital gains tax, you'd have to pay the government a part of that gain once you sell the share.

If a capital gains tax was 15%, you’d pay $24.90 to the government in this example.

It’s important to note that a capital gains tax is separate from a wealth tax.

You pay a capital gains tax when you sell an asset (and make a profit).

But with a wealth tax, you have to pay the government a part of your wealth every year.

Will we see a Capital Gains Tax introduced in New Zealand?

It's possible.

Labour’s proposing a flat 28% tax on profits made from selling property, starting from the 1st July 2027.

Now, this isn’t a full-blown capital gains tax on everything you own.

Your own home wouldn’t be taxed. And if you inherit a property from Nana, the gains she made wouldn’t be taxed either.

But all investment properties, holiday homes and baches would be fair game.

Here’s how it would look in practice:

You buy a property for $500k in July 2027
You sell it 10 years later for $1 million
That’s a $500k profit
You keep $360k, and the IRD takes $140k (28%)

This policy would applies to every property investor.

Let’s say you bought a property 10 years ago and have made $400k in capital gains so far.

Those gains aren’t taxed.

But if in July 2027 your property is worth $700k. You hold onto it for 10 more years, and you sell it for $1 million.

That extra $300k gain (that you made after July 2027), that’s what the IRD would take a slice of.

Labour says the money would be ring-fenced for healthcare. That way every Kiwi would get three free GP visits per year.

But what about the Bright-Line Test?

NZ still taxes capital gains from residential property – even though we don’t have a formal CGT. It’s called the Bright-Line Test

John Key’s National government introduced this in 2015.

This policy taxed capital gains on property bought and sold within 2 years.

In 2018, the Labour government extended the test to 5 years.

They did this again in 2021. This time they extended the test to 10 years for existing properties, but it stayed at 5 years for New Builds.

National has now reduced the bright-line test back to 2 years.

A Labour spokesperson confirmed that if a Capital Gains Tax was introduced, it would replace the current bright-line test rules.

The biggest danger for property investors with this capital gains tax

One of the biggest risks I see is that investors will let this talk of a potential capital gains tax spook them.

This is the 7th time a major political party has suggested a capital gains tax.

The government brought in a property speculation tax in 1973. That was Labour under Norman Kirk.

They taxed up to 90% of your capital gains. (This was actually the law!)

But then National won the next election and got rid of that policy.

Since that law was first introduced in 1973, house prices have gone up 8.3% per year.*

Then, in the late 1980s, the Labour Government was working on a Capital Gains Tax under David Lange.

They dumped the policy before the 1990 election, but still went on to lose.

Since 1989. House prices are up 6% a year.

Then in 2011, Labour was led by Phil Goff. He proposed a flat rate 15% Capital Gains Tax.

He lost that election.

Since January 2011, house prices are up 137%

Attempt #4 came in 2014. That was Labour under former leader David Cunliffe. He lost that election.

If you got spooked by that talk of a Capital Gains Tax, you would have lost out then, too.

Since January 2014, house prices are up 99 per cent.

Attempt #5 came in 2017.

Labour campaigned for a capital gains tax under Andrew Little. And then Jacinda Ardern.

She won that election. But the policy didn’t go ahead. She needed the support of NZ First. They put a stop to that policy.

Since January 2017 (when they started talking about a CGT), house prices are up 40.4%

Attempt #6 came in 2019. The Labour government started the Tax Working Group, which wanted a broad Capital Gains Tax.

They couldn’t get support. So, Jacinda Ardern ruled out ever bringing in a CGT while she led the party.

And we all know what happened to house prices after 2019.

Property values are up 32% since January 2019.

So, if you let talk of a CGT spook you off property … you could have lost out then, too.

And that brings us to today. This is the latest in a series of proposals from different political parties to tax capital gains.

That’s not to say that a Capital Gains tax won’t come in. Because maybe this time is different.

But if you did let a potential capital gains tax spook you off investing in the past ... you could have lost out on hundreds of thousands of dollars.

More from Opes:

What are the pros of a capital gains tax?

The arguments in favour of a capital gains tax vary, but often reduce to two core points:

Pro #1: A capital gains tax may increase housing affordability

New Zealanders usually think about CGT in the context of residential property investment. But, of course, the tax would cover all assets.

Some argue that a CGT will make housing more affordable over the long term.

That’s because property investors may be dis-incentivised to buy more properties.

That’s important to people who support the tax. The argument is that runaway house prices make it difficult for some Kiwis to buy their own homes.

This is true, and it also has a knock-on effect.

A rise in house prices may also mean an increase in rents. This causes a social issue where some Kiwis struggle to:

Afford adequate housing
Afford a reasonable standard of living while also paying the rent

The story goes if property investment is less profitable, demand will decrease.

This means house prices won’t be as buoyant.

Pro #2: A capital gains tax increases fairness within the tax system

The next argument is that wealthier people benefit more from tax-free capital gains.

People who earn higher incomes can afford to save and accumulate assets. These assets increase in value, making it easier for high-income people to grow their wealth.

But poorer people can’t afford to save as much so have fewer assets.

Right now the tax system primarily taxes income, especially derived from people working.

It doesn’t tax wealth or “economic income” from increases in the value of assets.

Some people see this as unfair and believe the tax system should address this.

What are the cons of a capital gains tax?

On the other side, there are also people who oppose a capital gains tax. They have two core rebuttals:

Con #1 – A capital gains tax will not slow house price growth

Many pro-property investment groups believe that a CGT will not improve housing affordability.

House prices will almost certainly keep going up if a capital gains tax comes in.

In fact, Labour’s projections need house prices to go up. Otherwise, there’s no extra money to pay for the free GP visits.

And if you look overseas, house prices have still gone up even with capital gains taxes (CGT) in place.

Australia’s CGT came in 1985. Since then, house prices are up 6.5% a year.*

The UK got theirs in 1965. Since then, UK house prices went up 8%+ per year.*

Canada introduced their CGT in 1972. House prices have gone up 6.7% per year since then.*

And the US has had one since 1913.

My data only goes back to the 1970s. But since that point, their house prices are up 5.4% per year.*

*Average annual compounding growth rates. Source: OECD.

Con #2 – The people who would have to pay a CGT already pay most of the tax

Those against a CGT say that higher-income earners already pay their fair share of tax.

These higher-income earners are more likely to own assets. So, is it fair to tax these Kiwis even more?

Yes, tax-free capital gains may seem unfair to those on lower incomes.

But about 50% of the lowest income earners in NZ already pay no income tax at all.

All income earners pay tax, but some also receive money back in benefits and tax credits (e.g. Working for Families).

“If you are working and earn $1000 a week but have four children, you might pay $200 a week in tax but get back $300,” according to Mark Keating, a senior lecturer in tax at the University of Auckland Business School.

“They are net receiving. It’s quite a strange system. It’s not common overseas because it’s quite bureaucratic.”

In that case, they get more money from the government each week than they contribute.

In effect, their tax rate is negative.

So most of the tax in NZ is already paid by the highest income earners. Some people say they already pay their fair share.

How understanding capital gains tax changed this investor's strategy

I was chatting with a property investor during one of our webinars. She’s in her mid-30s, owns a couple of rentals, and has flipped a few properties in the past. She figured she had a pretty good handle on how tax works for investment properties in NZ.

But she asked me, “If I sell my rental after two years, I’m all good for tax, right?”

That’s when we had an important conversation. I explained that, yes, under the bright-line test, the rules currently mean no tax after two years.

But that’s not the only time you might have to pay tax on your capital gains.

Because this investor had done a few flips before, there was a risk the IRD could view her as being in the business of trading properties.

That could mean paying tax on the profit, even if she held this one beyond the bright-line period.

She was surprised. She thought she was in the clear, once bright-line had passed.

“I didn’t realise my past deals could make the IRD look at this differently.”

A few weeks later, this investor decided to hold onto the property as a long-term rental.

She had a chat with her accountant and put a strategy in place to focus on building equity and cash flow, rather than risking a tax bill she wasn’t prepared for.

Understanding how capital gains tax works in NZ isn't just about following rules ... it's about peace of mind and making smarter decisions about her property portfolio.

And if you’re thinking about selling, it’s worth getting advice.

The tax rules aren’t always as simple as they look on the surface. But understanding them can make all the difference.

What should property investors do?

A broad-based capital gains tax doesn’t exist within New Zealand ...yet.

But if Labour wins the next election, it's likely to be back on the table.

This news will make some people nervous, and maybe derail some plans.

You’ve got to base your decision on what the tax settings are today. Not necessarily what they could be in the future.

Before the last election, National were saying that they were going to bring back interest deductibility.

But as an investor, you couldn’t bank on the rules changing … until they won the election (and changed the rules).

Because you don’t know what will happen in the next election (or after it, in the coalition negotiations).

The reality is that a major political party is proposing a capital gains tax – a policy that we’ve been debating as a country since 1973.

Do I want to pay capital gains tax? No.

But if I have to, it’s just another cost of doing business.

You don’t say “I’m not going to get a job” because you have to pay income tax.

And you don’t stop investing because the IRD wants a slice of your gains.

At the end of the day, property still builds wealth. One political party just wants a small piece of the pie.

Ed McKnight

Resident Economist, with a GradDipEcon and over five years at Opes Partners, is a trusted contributor to NZ Property Investor, Informed Investor, Stuff, Business Desk, and OneRoof.

Ed, our Resident Economist, is equipped with a GradDipEcon, a GradCertStratMgmt, BMus, and over five years of experience as Opes Partners' economist. His expertise in economics has led him to contribute articles to reputable publications like NZ Property Investor, Informed Investor, OneRoof, Stuff, and Business Desk. You might have also seen him share his insights on television programs such as The Project and Breakfast.

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