NZ Election 2026: Tax Policies and What They Mean for Businesses

The General Election is coming up on November 7, and I don’t think the left versus centre-right divide has ever been so stark leading into an election.

The existing coalition, the centre-right bloc, is campaigning for no or minimal tax changes. On the other hand, the parties in the left-bloc are campaigning for significant tax changes.

Although The Opportunities Party (TOP) presents itself as a potential coalition partner for either side, its tax platform aligns much more closely with the left-bloc. However, TOP has not included any of these tax measures among its non-negotiable coalition terms. Meanwhile, National has maintained a firm stance against partnering with TOP.

Polling indicates an incredibly tight race, positioning TOP as the potential kingmaker. If they are able to clear the 5% parliamentary threshold, this will likely determine the outcome of the entire election.

The fact that there will be a minimum of 3, but quite likely 4, parties making up the next Government means that predicting the possible tax changes is very difficult. For this reason, we are seeing people sitting on the sidelines and holding off on investment decisions, although this is something that happens before almost every election.

Here is a breakdown of the core tax positions put forward by each political party.

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ACT

ACT is not promising significant changes. In prior election campaigns, they were promising tax cuts, but they have seemingly abandoned that for this election.

One interesting proposal they have made is to remove tax on KiwiSaver schemes, a move that would have a significant impact on people’s retirement savings.

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Greens

The Greens are campaigning for significant tax changes. These include:

• Introducing a 2.5% wealth tax on net assets of any individual in excess of $10m. This applies to assets such as property and shares, but would exclude the family home.
• Assets held in trusts most likely would be attributed to the settlor but also could be attributed to beneficiaries.
• Capital acquisition tax: applied to inheritances and gifts valued above $1 million – tax paid by the recipient. Family farms and family homes are exempt.
• Businesses with a turnover of $30m classified as “large” – these businesses will receive greater compliance focus from IRD and an increase in the company tax rate from 28% to 33% for these “large” businesses.
• Restore the bright-line period to 10 years and bring back interest deductibility rules. While the policy won’t apply to family homes, there is no indication that there will be concessionary rules for “new builds”, as was the case when these rules were previously in place.
• Personal tax rates will change, with the significant changes being the introduction of a tax-free threshold for the first $10,000 of income, but also a 45% top personal tax rate applying to income in excess of $160,000.
• 0.06% Bank levy on Big Four Bank liabilities.

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Labour

By comparison to their potential coalition partners, Labour’s tax policy is quite tame, including zero changes to personal income tax rates.

Labour is proposing a “Lite” Capital Gains Tax (CGT), targeted only at commercial and residential property gains made on or after 1 July 2027.

• Family homes, farms, inheritances, KiwiSaver, shares, business, and personal items are exempt.
• Roll-over relief: “small businesses” selling their premises to buy a bigger one will not be taxed.
• Relationship property transfers excluded.
• Flat tax rate of 28% with the taxing point being the time of sale.
• Capital losses may be carried forward but can only be offset against future property gains (ring-fencing).
• Many public comments by Labour early in the campaign suggested the CGT was to be limited to residential rentals and holiday houses. However, the published policy clearly extends to commercial property.

Labour reluctantly ruled out reintroducing the interest denial rules for rental properties.

Surprisingly, Labour is one of the few parties that is promising to introduce some business-friendly policies, although these would be funded by removing the Investment Boost accelerated depreciation, which has been a very useful tool for businesses. 

The two changes are:

• Increasing the low-value asset write-off threshold from $1,000 to $10,000 for businesses with less than $10m in turnover; and
• Increasing the GST registration threshold from $60k to $80k.

Both of these changes would be welcomed and are overdue.

To date, Labour has rejected many of the policies put forward by their potential coalition partners. However, it should be noted that Labour Leader Chris Hipkins has previously ruled out a capital gains tax while he is leader of the Labour Party, so I take ruling out the likes of land and wealth taxes with a grain of salt.

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National

National’s tax policy is simply no new taxes.

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NZ First

The only tax policy that NZ First has announced is a proposal to reduce the company tax rate to 20% for SMEs (turnover less than $30m).

They have also put forward specific KiwiSaver proposals, including providing a $1,000 government contribution at birth and gradually raising mandatory contribution rates to 8% and eventually 10%.

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Te Pati Māori

Te Pāti Māori are also campaigning for radical tax changes. Their proposals include:

• Changes to tax rates – reducing rates below $60k income. Significant increases for those over $60k. 39% from $90k. 48% top tax rate.
• No GST on food.
• 1.5-2.5% wealth tax for net assets in excess of $2m.
• Increase the company tax rate to 33%.
• 5% International profit transfer tax.
• 33% Land banking tax.
• 2% Vacant house tax.
• 5% Stamp duty (excluding first home buyers under $1m).

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TOP

TOP’s headline policy is their Universal Basic Income (UBI), which they have campaigned on for the last few elections. Under the UBI, all adults would receive a universal benefit of $19,400. To pay for the UBI, there would be a new land tax and significantly increased tax rates.

Existing personal tax rates would be replaced by three new brackets:

• Income up to $50,000: 28%
• Income between $50,000 and $200,000: 34%
• Income above $200,000: 39%

The land tax is proposed to be 1.75% of the value of urban land or 0.5% of the value of rural land. Note this is just the land, not any improvements or buildings. There would be an ability to defer the LVT until death for individuals.

TOP also proposes a major overhaul of KiwiSaver, with contributions increasing to 12% with zero tax on contributions.

TOP’s changes are radical, but none of these proposals are listed in their bottom-lines for a coalition deal, so in reality they feel much like attention seeking rather than genuine policies.

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Impact on New Zealand Businesses

Many businesses are rightly concerned about the potential outcome of this election. Given the policies of the left-bloc, a change in Government could have a significant impact on businesses and the economy, most heavily impacting business confidence, which then flows onto investment intentions. However, the one thing that businesses and markets despise more than anything else is uncertainty. Given the polling numbers, the actual policies of the new Government could take many weeks to take shape.

Ultimately, many of the proposed policies by the minor parties are pure fantasy. The minor parties know they can promise whatever they think will win them attention and votes, because at the end of the day they know that the nature of MMP means that there will be a coalition, and they do not have to follow through on their promises. That being said, with every passing election, I am starting to wonder whether some of the minor parties are aware of, or even care, how much damage some of their policies could cause to our economy.

On the bright side, additional spending from a change in Government would certainly provide the economy with some stimulus, but the side effect would be that this would almost certainly come at the cost of higher debt and further stoke inflation.

At the end of the day, the election is a bit of a side-show because the next Government faces a tough job as the major threats to our economy are largely driven by offshore events. What happens overseas in the next year or two looks likely to have more influence on business and the economy than the Government. However, the make-up of the Government will certainly have a strong influence on inflation and therefore interest rates.

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Lessons from overseas

In recent years we have seen very tax-happy Labour-led Governments in Australia and the UK. Never in my working life have I seen as much enquiry from Australians wanting to move to New Zealand. Likewise, the UK’s Labour.

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Capital gains tax

Capital gains tax is always a hot topic in New Zealand, so it is worthy of further discussion.

New Zealand is quite unique in the fact that it does not have a comprehensive capital gains tax. Singapore is the only other country of note not to have a capital gains tax. However, while New Zealand does not have a comprehensive capital gains tax, we do have a lot of taxes that act like capital gains tax, including the FIF regime, the financial arrangement regime, and land taxes (especially the bright-line rule).

There are good arguments for and against capital gains taxes. The best argument for introducing a capital gains tax is that it fits the New Zealand tax framework of broad-base, low-rate or BBLR.  A capital gains tax at a relatively low rate would add to the broad base. Therefore, introducing a low-rate capital gains tax to reduce or help keep other taxes lower makes a lot of sense conceptually.

The best arguments against a capital gains tax are that:

- it will take a long time to start generating tax revenue; and 

- it will almost certainly increase house prices and rent; and

- a capital gains tax often taxes inflation rather than actual capital gains, although this is dependent on design.

Recent attempts to introduce a capital gains tax have had the rate at a taxpayer’s marginal rate with no discount or indexing to take into account inflation.  In my opinion, the design of these was very unfair and would have badly tarnished New Zealand’s global reputation.  The design of Labour’s current proposal is slightly better with the rate being a flat 28%, but even that is too high compared to other countries.