Mansions, KiwiSaver, art: How Labour's new tax could change investing

Wednesday, 29 October 2025

Labour leader Chris Hipkins has confirmed plans for a capital gains tax targeting profits from commercial and residential properties, excluding the family home. The policy, leaked a day early, has sparked internal tensions.

Money is often described in the language of water, with cash said to flow in the direction of least resistance.

Tax changes, like those contained in the Labour Party’s leaked capital gains tax (CGT) policy, often function as diverter valves, redirecting the flow of money in an alternative direction.

'Tax,” Simplicity founder Sam Stubbs tells me, “is the single biggest determinant of investor behaviour over the long term.'

“If you change the tax settings, you change behaviour.'

A 28% CGT on residential and commercial investment properties will ultimately make investors reconsider their decision to invest in property, Stubbs says.

“All this does is level the playing field,” he explains, pointing to the fact we already have a 28% tax on portfolio investment entities, including KiwiSaver and managed funds.

“With a level playing field, people will see there are other investments not only more liquid but which often offer higher returns.”

Liquidity in an investment refers to how quickly an investment could be converted to cash if needed. Money in a savings account, for instance, is far more liquid than funds tied up in a property, which would have to be sold before any dollar bills can be accessed.

The argument Stubbs makes is that investors operating under the law change would have to reconsider the quality of their investments on the merits, rather than following the old path of least resistance found in a tax-free ride.

Simplicity's Sam Stubbs says the proposed law change could level the playing field between investments.

“It takes the bright line test [which makes properties sold within two years of acquisition taxable] and just effectively makes it a zero-year bright line test,” he says.

This is to say property investment will now be measured by its performance rather than the tax incentives associated with it.

So, if a new tax does change behaviour, where could individuals shift their money to ensure a reliable return to bulid their wealth?

Mansion time

A tax change might shift behaviour, but it won’t always happen in the way the lawmakers intended.

Rather than outright killing property investment, these changes could simply change the way we go about doing it.

Deloitte tax partner Robyn Walker says there’s still need for more detail on the proposed tax changes.

Robyn Walker, a tax partner at Deloitte, says the exclusion of the family home still gives New Zealanders a place to protect their wealth from a CGT: the family home.

Those eager to avoid the 28% hit could be incentivised to shore up their primary residence and concentrate more of their wealth in one place, rather than spreading it over two or three properties.

“That's called the mansion effect,” says Walker.

Instead of spending on maintenance or improvements for taxable rental properties, investors could pour more money into renovations or purchasing land adjacent to their family home.

Given art, inheritances and gifts are also excluded from the CGT, wealthier New Zealanders could also be encouraged to shift more of their wealth to material items of high value that can be placed into a home and bequeathed to their heirs tax-free.

The hope then of shifting more money into other, more productive investments isn’t as clear-cut as it might seem on the surface.

Much of this will come down to the preferences of the investors and whether they are looking for outright growth or a means to protect the wealth they have.

Commercial investor questions

Some important questions about how commercial property investors could be affected will only be answered once more details are released.

Walker says she expects a lively debate about how the laws regarding commercial property sales are actually put into practice, because this could greatly impact the willingness of commercial investors to continue investing in improving factory and office spaces (which are certainly part of the productive economy).

Commercial property investor could be forgiven for wondering how they’d go about purchasing a new building with the suggested CGT in place.

“If you’re a business and you need to move your factory, you shouldn’t be taxed on the sale of the first factory because this could prevent you from buying the second factory,” says Walker.

Rollover relief, says Walker, is integral in determining how commercial property investors can go about upgrading their facilities. If the tax doesn’t allow for upgrades of this nature to happen, then investors may find it difficult to expand or move into larger facilities when needed.

To make informed decisions, investors will need to have clarity on these more nuanced issues – and this will only come once the detail behind the policy is released.

“Capital gains tax legislation is 900 pages long in Australia, because of the complexity involved,” says Walker.

The point being: investors are best to wait for the details before rushing into making any rash decisions.

The winners: The boat, KiwiSaver and art

In confirming the announcement, the Labour Party has somewhat inadvertently offered a hint at a reworked version of the Bach, Beamer and Boat.

The boat remains, but in lieu of the other two, we now have KiwiSaver, shares, business assets and art.

These were all listed among the exceptions from the relatively narrow CGT law, which is being proposed.

“It’s good the proposed CGT wouldn’t affect KiwiSaver,” says Di Papadopoulos, the CEO of Booster Kiwisaver Scheme.

“This means upcoming increases in contributions from members and their employers won’t be chipped away at by a new tax and will help build Kiwis’ wealth.”

The Government has announced a round of changes designed to increase the employer contribution to KiwiSaver to 3.5% on 1 April 2026 and then to 4% on 1 April 2028.

Papadopoulos says those with investment properties (and perhaps those interested in investing in property) will be keeping a close eye on the changes, but many New Zealanders now see KiwiSaver as integral to their retirement plans.

“They will be benefitting from higher contributions from next year.”

This brings us back to the flow of money.

The increased employer contributions, when combined with Labour’s capital gains tax, will create a strong incentive to contribute more to KiwiSaver.

With the tax rate on gains for both KiwiSaver and property investment now the same, investors have to weigh up the pros and cons of each side. Yes, KiwiSaver might include strong government incentives and doesn’t come with the burden of maintenance and insurance costs, but there’s still a powerful emotional pull that comes with owning something material. You can feel bricks and mortar, but you can’t feel shares in Coca-Cola.

Much of this will come down to your objectives, your personal views on investing and wealth generation, and how important it is for you to hold onto something physical.

For those who want the best of both worlds, perhaps the time has come to complement your KiwiSaver strategy with a touch of decent art. It may not be bricks and mortar, but at least any gains made on splashes of oil across canvas come tax-free.

Disclaimer: The information in this article is of a general nature and is not intended to be personalised financial advice.