MEDIA RELEASE (NZ)

Chartered Accountants Australia and New Zealand has provided early analysis of the capital gains tax policy that Labour will take into the 2026 General Election, saying New Zealand’s tax base is not sustainable and all political parties must have a plan to strengthen it for the long term.

“New Zealand’s tax base settings are not sustainable in the face of an aging population,” says Chartered Accountants ANZ Chief Executive Officer Ainslie van Onselen.

“As Treasury recently detailed, more than half of New Zealand’s total tax (52%) is collected from individuals as income tax and the group paying this tax is shrinking.

“Political parties must have a plan to deliver a sustainable tax base that is prepared for future challenges. It must include consideration of how we balance growth, expenditure and tax.

“Labour’s CGT policy is what we would call ‘CGT light.’ It has some attractive features, namely that it’s easy to understand and comply with. However, while the policy is framed as addressing shorter term health system challenges, it’s unlikely to generate significant short-term revenue.

“All parties must look to the long term and to making our tax base sustainable – not just to election night 2026.”

CA ANZ NZ Country Head Peter Vial FCA explained CA ANZ’s early analysis.

“Labour’s CGT policy is easy to understand, and compliance and enforcement would be relatively simple and low cost. The tax applies when assets are sold. In concept it is in line with the original Tax Working Group proposal, but expanded to include commercial property,” said Mr Vial.

“As we’ve seen internationally, capital gains taxes do not generate significant revenue in the short or even medium terms. Long term however they typically provide a steady revenue stream and broaden the tax base. Using the tax to cover a specific policy expense is unusual.

“The proposed CGT’s inability to generate substantial income is compounded by the fact that NZ residential property prices have fallen following the Covid-era property bubble. It’s not clear that there would necessarily be significant gains on property ownership in the near future.”

“Labour has elected to go with a narrow base of residential and commercial property only with a high tax rate of 28%. The alternative would be a broader base with the tax applying to a wider range of assets and a lower rate of around 15%. Arguments can be made for both alternatives.

“Having all assets enter the regime from 1 July 2027 suggests there will be no tax on gains made before that date. However, in time all applicable assets will need to be valued at that date, and gains measured from that point.

“There are a range of ways to achieve this, including by way of allowing retrospective valuation by registered valuers. A registered valuation would be sensible where the gain is expected to be substantial. Other valuation options may be available, like QV or council valuations,” concluded Mr Vial.