Labour has relentlessly said it will only introduce one new tax if elected, and Chris Hipkins says 90% of Kiwis won't pay it. National is, of course, deeply sceptical it's a good idea - but what is actually being proposed?
Labour has proposed introducing a limited capital gains tax if elected at November's election.
It comes after the party previously endorsed one at previous elections, but Jacinda Ardern and Chris Hipkins then dropped the plan the last time they were in government.
Opening the door on the tax has since quickly become one of the main dividing lines of the campaign after Hipkins revealed the capital gains tax plans in October 2025.
The tax would target profits from selling certain types of properties, but not the family home, and Labour says every dollar raised would be ring-fenced for health.
National has repeatedly ruled out introducing a capital gains tax, and party leader Christopher Luxon and finance spokesperson Nicola Willis have criticised Labour's plan.
The party said all of its commitments are "fully costed and fully funded". (Source: 1News)
They also argue more broadly that their counterparts can't be trusted on tax and that a Labour coalition might bring along more taxes - an outcome Hipkins has firmly rejected.
With weeks until voters head to the polls, here's what the policy would mean in practice.
What even is a capital gains tax?
A capital gains tax is a tax on the profit made when something valuable is sold for more than it was bought for. That "something" could be property, shares, a business, or other investments that tend to grow in value over time.
The increase in value, or profit, is the "capital gain".
For example, if an investor buys a rental property for $700,000 and sells it a few years later for $900,000, the "capital gain" is $200,000.
Right now, with a few exceptions, that $200,000 of capital gains would be untaxed.
Supporters of a capital gains tax argue that the lack of a tax like this is unfair and pushes money into property rather than other parts of the economy.
At the moment, the many people who earn money through work have to pay tax on every dollar, while profits from selling investment property can usually go untaxed.
Opponents say a new capital gains tax — especially one with complicated exemptions — adds complexity, could discourage investment and may push up rents.
It's worth noting too that New Zealand already has a form of a capital gains tax — with some property profits taxed through the bright-line test, which applies when residential property other than the family home is sold within two years of purchase.
What properties would be exempt?
Let's take an example with that case study from earlier, assuming the investor bought the rental after Labour's start date of July 1, 2027.
If an investor makes a "capital gain" of $200,000 from selling a property, Labour's plan would tax that $200,000 at 28%, giving a tax bill of $56,000. The remaining $144,000 of profit would stay with the seller alongside the original $700,000.
Under Labour, every property covered by the tax would be given an opening value on July 1, 2027, which it calls "valuation day".
Only the increase in value from then would count.
Labour gives the example of a commercial building bought in July 2025 for $400,000. It is valued at $600,000 on valuation day on July 1 and later sold for $700,000. Only the $100,000 gained after July 1, 2027 would be taxed.
The 28% rate matches the company tax rate, and it would be a flat rate applied to each individual's share of a gain, with no adjustment for inflation.
Party leader Christopher Luxon axed both ideas as a part of a ‘no new taxes’ election pledge. (Source: 1News)
The capital gains tax is only paid when an asset like a property is sold, meaning the owners wouldn't be taxed each year as their property rose in value on paper.
When selling, owners could deduct what they paid for the property and what they spent on improvements, while holding costs such as rates and mortgage interest couldn't.
The tax would not apply when a property is transferred to a spouse or partner, or when a property changes hands because a relationship ends or someone dies.
Labour's proposal is narrower than the capital gains taxes common in other countries, which cover a wider range of assets including shares.
The party has firmly ruled out applying the tax to the family home, farms, KiwiSaver, shares and businesses. The policy also exempts gifts and personal items such as cars, boats, art and furniture.
Party leader Chris Hipkins has said 90% of New Zealanders would not pay the tax.
For most households, whose main asset is the home they live in, that is likely to hold true, but not every residential home a person owns would be exempt.
Labour is planning to use the main-home test from the existing bright-line rules, meaning only the property someone lives in day to day is intended to be exempt.
Baches and holiday homes would be taxed if sold, as could a family home left empty or rented out while its owner works in another city.
Where would the money go?
Labour estimates the tax would raise an average of $700 million a year and has said money raised would all go towards the health system.
The tax raised starts at $100 million in 2027/28 and climbs to $1.35 billion a year from 2030, based on a model developed by the 2019 Tax Working Group.
Infometrics chief economist Brad Olsen told Breakfast that it wasn't exactly clear how much would be raised from this “narrow, constrained” capital gains tax. (Source: Breakfast)
What do other countries do?
New Zealand is something of an outlier when it comes to a capital gains tax.
Most countries in the OECD tax capital gains in some form.
For example, the UK introduced a capital gains tax in 1965, and a Labor government in Australia brought one in in 1985 — exempting the family home, as NZ Labour would.
The OECD and the International Monetary Fund have both suggested New Zealand adopt one, having argued the lack of the tax encourages money to flow into the housing market and that it leaves the tax system leaning too heavily on wages.
What's the history here?
It's also far from a foreign concept in domestic politics, having been a campaign issue for Labour before in recent elections — and it hasn't ended well previously.
In 2011, Labour leader Phil Goff campaigned on a 15% capital gains tax and lost. David Cunliffe then carried the same policy into 2014 and lost by even more.
Jacinda Ardern also initially suggested she could possibly introduce one in her first term, before backing away and promising to wait for a second term instead.
Her government's review on the issue, the Tax Working Group chaired by former national finance minister Sir Michael Cullen, recommended a broad capital gains tax in 2019.
But soon after, Ardern ruled it out for as long as she led the party, saying there was no consensus — a nod to then-coalition partner NZ First's opposition.
Hipkins went a step further in 2023, promising to not implement either a capital gains tax or a wealth tax if he were re-elected at that year's election. Some of his own ministers that year had also been working on a wealth tax proposal, and then-revenue minister David Parker gave up his portfolio, saying it was "untenable" after the plan was killed.
That history is part of why National is betting on the message to voters that Labour and other left-leaning coalition parties can't be trusted on tax.
At the 1News Leaders Debate earlier this month, Hipkins said the capital gains tax was the one issue he had changed his mind on over the past several years.
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