Could there be Income Tax changes with the next Government?
Income tax is a thorny issue, even though we all pay it. Some more than others.
The dreaded term “Capital Gains Tax” has reared its head again, and this time with more general support with the public. However, most of that support is provided it does not include them. Which begs the question who is “super rich” (and should pay it) and who is not?
First, we kick off with the current system.
This paper was correct as at 28 July 2026
| The current Income tax rates – Individuals | Income tax is paid on an individual basis (i.e. not combined between couples). NZ has a scaled rate of income tax based on the level of taxable income received by the person. $0–$15,600: – 10.5% $15,601–$53,500: – 17.5% $53,501–$78,100: – 30% $78,101–$180,000: – 33%$180,001 and over: – 39% Non-business taxpayers cannot generally claim tax deductions against their gross income. Generally, any business tax losses can be carried forward for offset in a future year. Receipt of foreign pensions or the withdrawal of foreign superannuation funds are taxable in NZ on a receipts basis (with some limited exemptions). While foreign income is also taxed in NZ for a NZ tax resident, some overseas tax paid may not be available as a credit offset or any offset may be limited. |
| The current income tax rates – Company rate | The corporate tax rate is a flat 28%. The income tax paid accrues as an imputation credit to attach to dividends when paid to shareholders (continuity rules apply). A withholding tax of 5% is generally deductible from dividends (along with the 28% tax credit). Shareholders pay their own marginal tax rate less the withholding tax and imputation credits. Imputation credits cannot be refunded but may be used in a later year. Generally, any business tax losses can be carried forward for offset in a future year. While foreign income is also taxed in NZ by a NZ company, some overseas tax paid may not be available as a credit offset or may be limited. |
| The current income tax rates for Trusts and Estates | The Trust tax rate is 39% where the income is more than $10,000, unless the income is distributed to beneficiaries. Beneficiaries pay their marginal tax rate on beneficiary income. The Estate tax rate is 33% in the year of death and 3 following years before rising to 39%. There are special rules for a very limited number of special purpose trusts. While foreign income is also taxed in NZ by a NZ trustee, some overseas tax paid may not be available as a credit offset or may be limited. Capital distributions or trustee tax paid distributions are generally tax free to beneficiaries (special rules apply to Non-Complying Trusts and Foreign Trusts). |
| CAPITAL GAINS OR TAX UNREALISED GAINS TAX | Contrary to popular opinion, NZ does operate a capital gains tax (CGT) system or otherwise taxes certain types of income. In summary these are: Certain land transactions, including residential property sold within 2 years of ownership (family home excluded), and certain other land transactions if the taxpayer is associated to a property dealer, builder or developer. Certain foreign investment funds (cost price over $50,000) are generally taxed on a deemed income basis (whether received or not). Different methods can apply. In many cases, foreign tax paid will not be available as a credit in NZ. Holding a high percentage of shares in a foreign company (usually a private company) may result in the deemed income in that company being taxable to the shareholder in NZ on an unrealised basis. Selling cryptocurrency or precious metals (with a potentially rebuttable assumption acquired with the intention of trading). Buying any capital or income earning asset with the intention of resale at a profit (e.g. shares). Because NZ does not have a “proper” or standard capital gains tax, any of these types of income is taxed at the person, trust or company’s relevant tax rate. |
| What’s the controversy with the current tax system? | The key issues being debated include: Inland Revenue research show the super-rich pay a lower average tax rate than other taxpayers, generally because of the absence of CGT. Should CGT be introduced to rebalance this? Because the super-rich are able to shelter their income indefinitely in corporate structures, should the corporate tax rate increase to offset this advantage? The super-rich are more likely to receive passive (unearned or capital) income compared to working taxpayers, as such should there be a transaction tax or levy on these passive sources of income (such as sale of shares, financial transaction fee, real estate gains etc)? Should taxpayers on very low income be exempt from income tax like many other countries? Is the 39% individual tax rate too low, or comes in at too high (or too low) a level? |
| NATIONAL www.national.org.nz (there is no specific policies page) | At time of writing, National had not indicated any new policy in this area. |
| LABOUR www.labour.org.nz/our-policies/ | At time of writing, Labour had announced the following proposal: A limited capital gains tax of 28% on realised capital gains on commercial property and residential investment property from 1 July 2027. Prior year realised and unrealised capital gains will not be taxed. |
| NZ FIRST www.nzfirst.nz/policy | At time of writing there was no formal policy announced in this area. |
| ACT www.act.org.nz/policies | ACT has proposed a two-rate income tax system with a top rate of 28%, aligning personal, trust, and company tax rates. |
| GREENS www.greens.org.nz/policy | The Greens published a comprehensive number of tax changes which include: Introduce an annual 2.5% tax on the net assets of the super-rich above $10 million (on an unrealised basis). There will be an exemption for the family home. Implement a Capital Acquisitions Tax on assets and gifts received worth over $1 million, with family farms and family homes exempted. Increase the corporate tax rate to 33% for the largest companies by turnover. Introduce a Bank Levy of 0.06% on the liabilities of the four big banks. Make big tech companies pay their fair share by enforcing the 5% withholding tax rate on the profits sent offshore (will relate to service and licence fees). Prevent interest tax deductions for landlords and increase the period the residential brightline rules apply. Create a new tax-free threshold of $10,000 for individuals. Increase the highest individual tax rate to 45% and introduce this at a lower marginal level of $160,000. |
| TE PATI MAORI www.maoriparty.org.nz/policy | At time of writing there was no formal policy announced in this area. |
