Australia's budget has put New Zealand's light-touch property tax settings front and centre
Australia's May 2026 federal budget has handed New Zealand an unexpected moment in the international spotlight — and reignited a domestic tax debate heading into this year's election.
The budget, delivered by Treasurer Jim Chalmers on 12 May, tightens two pillars of Australian property investment. From 1 July 2027, the existing 50% capital gains discount for assets held longer than a year will be replaced by an inflation-indexed method with a minimum 30% tax on gains. Pre-1985 assets, previously exempt, are now captured. At the same time, negative gearing on established rental homes purchased after budget night has been curtailed — landlords can no longer offset rental losses against salary or other income, except on new builds.
A headline in The Australian newspaper declared the budget had increased New Zealand's appeal as a tax haven, with business owners and residential investors across the Tasman said to be looking at New Zealand with 'genuine envy,' RNZ reported.
How the two systems actually compare
New Zealand's settings are markedly different. There is no broad capital gains tax — only a two-year bright-line test on residential investment property. Rental losses are already ringfenced and cannot be offset against other income. And following the full restoration of interest deductibility in April 2025, landlords here have relatively favourable cash-flow conditions.
Infometrics chief forecaster Gareth Kiernan (pictured upper left) was direct about the potential consequences for New Zealand's property market, telling RNZ: "Especially given that Australians aren't restricted under foreign buyer rules, and the sizable shift in the exchange rate over the last year that makes our property appear that much cheaper" — a combination that could meaningfully affect borrowing demand and competition for established properties.
Westpac chief economist Kelly Eckhold (pictured upper right) acknowledged New Zealand's comparative advantage, telling RNZ the country had "relatively advantageous rules with respect to" property investment.
Speaking separately to Stuff, however, Eckhold was sceptical of the tax haven label.
"I find it a bit strange… a tax haven is usually a place where people put money to avoid tax, and I would have thought that for Australians, buying property in New Zealand wouldn't provide much of a shield," he said.
Deloitte tax expert Robyn Walker said that New Zealand was "definitely not" a tax haven, but conceded the narrative had taken hold.
"That said, in the aftermath of the Australian Budget there has definitely been a bit of a cheeky 'tax marketing' narrative around the tax system being better in New Zealand," Walker told RNZ.
Cash flow is what investors actually care about
The tax label debate aside, economists say the more revealing question for investors is what the two systems mean for day-to-day returns.
Simplicity chief economist Shamubeel Eaqub (pictured lower left) cautioned against reading too much into the tax comparison, saying that "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."
But Cotality chief property economist Kelvin Davidson (pictured lower right) offered the most pointed insight for those weighing up the two regimes. Davidson said investors he had polled at a recent event would rather have a capital gains tax paired with full interest deductibility than the reverse.
"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," he said.
With interest deductibility fully restored in New Zealand, the cash-flow equation currently favours those with investment property here — but Davidson warned the direction of travel may not hold.
"It does feel like we are shifting towards tighter property taxes over the medium term," he said.
The election dimension
That uncertainty is already playing out in the election campaign. Labour is heading into the 2026 vote with a proposal to introduce a capital gains tax on investment property sales, with family homes and farms exempt.
ACT leader David Seymour welcomed New Zealand's comparatively competitive settings.
“The fact is, being a competitive place that's good to work, save and invest is a good thing for New Zealand," Seymour said.
The Greens took the opposing view, with co-leader Chlöe Swarbrick questioning whether attracting investment through low taxes solved the right problems.
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