Labour will make no changes to interest deductibility rules for residential landlords if elected, as party leader Chris Hipkins confirms he wouldn't revisit the settings.
Hipkins said the decision was tied directly to the party's plan for a capital gains tax, which the party had previously ruled out at the time deductibility rules were changed.
He said Labour had "recently finalised our decision on that" after questions by 1News.
"We've made a decision to introduce a simple targeted capital gains tax instead. At the time, rules were changed around interest deductibility the Labour Party, at that point, had ruled out a capital gains tax," Hipkins said.
"Now, clearly, that's changed, and so we have made the decision not to make any further changes to interest deductibility rules."
National seized on the shift today, with campaign chairperson Simeon Brown accusing Hipkins of an "eleventh-hour u-turn" on a policy Labour had spent years condemning.
"If Chris Hipkins can change his position on a policy he has attacked for three years, why should anyone believe him when he says there are no more taxes coming?"
Labour began rolling back the deduction in 2021 when in government, before the current coalition reversed that, phasing the deduction back to 100% from 2025.
Opposition parties were critical of the change, calling it "landlord tax cuts" at the time, including Hipkins.
But he said today landlords would eventually face a capital gains tax when selling investment properties, and altering interest deductibility could affect those settings.
The interest deductibility rule lets landlords deduct the mortgage interest on a rental property from their rental income, ultimately reducing their tax bill.
The government hopes the policy will drive down rent costs – but politicians don’t agree on the evidence. (Source: Breakfast)
"Landlords will ultimately be subjected to a capital gains tax [under Labour] when they sell their investment properties. If you were to make changes to interest deductibility, it would ultimately change then, potentially, the capital gains tax settings," Hipkins said.
"There is an interrelationship between those two policies, which was the thing that we said we were going to work through. We've now worked through that, and we're not going to make further changes."
Last year, Labour proposed a 28% capital gains tax on commercial and residential property, excluding the family home, farms, KiwiSaver, shares, business assets, inheritances and personal items. The party would use revenue to spend on health.
When the deduction was reinstated by the coalition years ago, Labour's finance spokesperson Barbara Edmonds had labelled it a "tax advantage for the wealthy".
Labour is adopting the same surplus timeline forecast in Budget 2026 but promising a different route to it. (Source: 1News)
Speaking to media today, Hipkins also addressed his party's campaign launch this weekend. "It's going to be a high energy event," he said.
"Cost of living, jobs, health, and homes will certainly be well traversed in the comments that we'll be making there. We'll be really looking forward to hitting the campaign trail.
"We'll have a significant policy announcement that we'll be making."
Labour's position also puts distance between it and the Greens, who have stated they want to scrap the "tax cuts for landlords".
It's a position National has itself branded a "Rentals Tax" and included on a list of what it claims are "nine new taxes" from "Labour" and its prospective coalition "mates".
National's campaign chairperson Brown said Labour couldn't be trusted.
"After three years of attacking ‘tax cuts for landlords’ and blaming them for the cost-of-living crisis, Chris Hipkins has performed an eleventh-hour u-turn and decided to keep the very policy Labour has spent years condemning," he said in a media release.
“Chris Hipkins has a major problem. Labour needs to find $18 billion for its hidden bill, and he has just taken billions of dollars in additional revenue off the table.
“The maths was already murky. Now it’s written in hieroglyphics."
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