Capital Gains Tax

Understanding Labour’s Proposed Capital Gains Tax: What You Need to Know

1. What’s being proposed?

On 28 October 2025, the Labour Party unveiled a targeted CGT policy, aimed at profits from certain property sales.

These profits would be taxed at a flat rate of 28%, mirroring the company tax rate and preventing one-off property sales from pushing individuals into the 39% personal tax bracket.

The timing of the tax is critical. The announcement has the tax applying to profits realised after 1 July 2027.

Family homes, farms, businesses, KiwiSaver and inheritances are all exempted.

2. Why now — and what’s the motivation?

The Labour Party argues the tax addresses two things: property speculation (and untaxed gains) and pressure on the public health system.

The aim is also to shift investment away from property and towards more “productive” business activity.

3. “Valuation Day” and how it works

An important operational element of the CGT proposal is the concept of a valuation day. While full details haven’t been released, we expect it to mirror how CGT was introduced in Australia. Here’s how it worked for them, and what it could mean for property owners and investors:

What is Valuation Day?
A valuation day is a cut-off date on which the value of assets (in this case, property subject to the new CGT) is established for future tax calculations. For this proposal, gains made after this valuation day (1 July 2027) would be subject to tax.

In effect:

• The asset’s value as at that date becomes the cost for the CGT regime.

• Any increase in value after that date is potentially taxable when sold.

• Gains before that date are explicitly excluded from the tax.

How it works in practice

Here are the practical steps and implications:

• On 1 July 2027 (or whichever effective date is legislated), each property potential subject to the CGT must have a “benchmark” value recorded. That becomes the starting point for measuring future gains.

• In Australia, valuations were able to be completed after the CGT start date, using retrospective methods based on sales data and market evidence as at the valuation day.

• Costs incurred before benchmark date generally cannot be recognised as reducing the taxable gain (since the pre-benchmark gain is excluded).

• Because valuation day requires accurate benchmark records, administration becomes critical (particularly for tracking costs, capital improvements, and property use).

4. Implications for you

With an election and change of government needed for this proposal to progress, there may be no immediate implications — so there’s no need for action right now

However, sooner or later, a government of one colour or another is likely to introduce some form of CGT. We recommend reviewing how your assets are held — whether through a company, trust, or personally. Once a CGT regime arrives, restructuring can become complex, so it’s worth getting this right before any rules are in place.

Get in touch if you’d like to talk through how this might affect you.