Capital gains taxes have been increased. Where previously investors could have a 50% discount if they owned an asset for at least a year, that is being replaced by a discount based on inflation, and a minimum 30% tax on capital gains – except for people who are on a pension or other income support or investing in new build housing.
Assets bought before 1985 that previously were not captured for capital gains tax purposes are also now included.
Landlords also will not be able to reduce their tax by deducting rental property losses from income earned elsewhere, except for new builds.
A graph showing the Australia-New Zealand spending gap per person in 2025. Photo / Shamubeel Eaqub
New Zealand does not have a capital gains tax, apart from the bright-line test that applies to residential investment property bought and sold within two years.
Rental property losses are already ringfenced in the investor’s residential property portfolio and cannot be offset against other sources of income.
Simplicity chief economist Shamubeel Eaqub said Australia had long had more stringent taxes on a wider range of things, including capital gains tax and stamp duty.
He said the Australian capital gains tax changes were significant, but unlikely to drive people across the Tasman.
He said what mattered to businesses was whether they could make a profit, then how much of it they could keep.
“The first part hasn’t really changed, the main reason why people start up a business is because they want to make a successful business and the chances of creating a successful business are much higher in Australia than in New Zealand.”
People had to make a taxable gain to pay capital gains tax on it. “It’s not tax on value but tax on gain, so you have to make a profit to pay tax on it.”
Australia had a broader, more diverse range of taxes, he said, while New Zealand focused more on personal income tax and GST. Australia has a tax-free bracket for lower incomes.
Australian companies paid more in corporate income tax, and the Australian Government also collected more per capita in payroll tax, stamp duty, royalties, land tax and insurance taxes.
New Zealanders, on the other hand, paid more in GST, gambling taxes, motor vehicle taxes, rates and customs taxes.
A graph showing government revenue per capita by type. Photo / Shamubeel Eaqub
New Zealand’s Government spends more as a proportion of gross domestic product, which Eaqub said was due to Australia being better off overall.
“I’m not saying it’s a great system, they have their issues like we do but there are big changes taking place … they’ve ripped off the Band-Aid.”
Kelly Eckhold, chief economist at Westpac, said it was not controversial that New Zealand had a more generous tax treatment for property investment.
“New Zealand does actually have relatively advantageous rules with respect to that.”
A graph showing the Australia-New Zealand spending gap. Photo / Shamubeel Eaqub
Infometrics chief forecaster Gareth Kiernan said it would make sense for Australian investors to eye New Zealand.
“Especially given that Australians aren’t restricted under foreign buyer rules, and the sizeable shift in the exchange rate over the last year that makes our property appear that much cheaper.”
Deloitte tax expert Robyn Walker said New Zealand was “definitely not” a tax haven.
“That said, after the Australian Budget there has definitely been a bit of a cheeky ‘tax marketing’ narrative around the tax system being better in New Zealand. I think objectively, the New Zealand tax system is better than Australia.
“We have a simpler approach to a lot of taxes, whereas Australia is very complex and has a number of additional federal and state taxes which we don’t have to deal with in New Zealand. Our lack of a wholesale capital gains tax is a major point of difference.
“Without having looked at the detail of their negative gearing rules, conceptually they seem similar to our rules from 2019, albeit they have a new build exemption and we have the ability to opt out of the rules if the disposal of the property will be subject to tax.”
Cotality chief property economist Kelvin Davidson said it was still possible that New Zealand could move more in Australia’s direction.
“It does feel like we are shifting towards tighter property taxes over the medium term … perhaps we are more lenient on the capital gains side of things and Australia is more lenient on the cash flow side.”
He said he polled investors at a recent event and found that they would rather have a capital gains tax and the ability to fully claim interest costs as a business expense, rather than avoid a capital gains tax but lose interest deductibility.
“I’m not surprised by that because what it tells you is that it’s about cash flow … if you can’t service a loan, you can’t keep your property and the capital gains tax is sort of irrelevant because you’re not going to get the capital gain in the first place.”
– RNZ