Labour, tax, and your rental property — plan for the risk

Published by Ross Holmes Lawyers (RHL)

New Zealand goes to the polls on 7 November 2026, and tax is shaping up to be a live issue for anyone who owns a rental property. Yet Labour has so far released little in the way of detailed tax policy, which makes planning harder, not easier. This article sets out what Labour has actually said, what it has pointedly left open, and how investors can sensibly prepare. The most important risk, it turns out, is not the policy Labour has announced — it’s the one it has not ruled out.

Key points

•     New Zealanders vote on 7 November 2026; Labour has so far been light on detailed tax policy.

•     Labour’s flagship tax announcement is a capital gains tax on investment property from 1 July 2027.

•     Labour removed interest deductibility on rentals once before, in 2021, and has not ruled out doing so again.

•     The current Government restored full interest deductibility from 1 April 2025.

•     Prudent investors should stress-test their position for a change of government — before polling day, not after.

What’s happened so far

Interest deductibility — the ability to deduct mortgage interest as a cost against rental income — has become one of the most politically contested aspects of New Zealand tax. In 2021, the then Labour Government began phasing it out for residential rentals, citing concern that the tax treatment was fuelling property speculation. Interest on properties bought after 27 March 2021 became non-deductible, and deductions for older properties were progressively reduced.

The current National-led coalition, with ACT and New Zealand First, reversed that. Deductibility was phased back in and fully restored — 100% deductible — from 1 April 2025. The Government argued the change would ease pressure on rents and simplify the tax system. So, as things stand today, landlords can deduct all of their mortgage interest again. The open question is whether that survives a change of government.

What Labour has actually said

Less than you might expect. With the election months away, Labour has been notably light on detailed tax policy, and the few policies it has released have drawn close scrutiny. Its main tax announcement is a capital gains tax: a flat 28% on gains from the sale of residential and commercial property (the family home excluded), proposed to apply from 1 July 2027, with the revenue earmarked for free GP visits. Labour has also proposed a “New Zealand Future Fund” focused on domestic investment.

On housing, Labour’s stated priority is affordability. It has criticised the current Government for handing property investors what it calls billions of dollars in tax breaks while families face rising housing costs — and says it would make it easier to buy a first home, make renting fairer, and build more homes. The Government, for its part, maintains that restoring deductibility supports renters by keeping more rentals in the market and rents lower. Both framings are political; investors have to plan around the underlying policy reality.

The one thing most people get wrong

‍Here is the trap. Most investors are budgeting as though 100% interest deductibility is a permanent feature of the landscape. It is not — it is one of the most reversible settings in the tax code, and it has already been switched off once in living memory.

And note carefully what Labour has, and has not, said. Its announced policy is a capital gains tax, not the removal of interest deductibility. But it has not committed to keeping deductibility either, and it removed it before. In other words, the headline risk for a leveraged investor may not be the policy Labour is campaigning on; it may be the one it is staying quiet about. Planning only around the capital gains proposal, and assuming deductibility is safe, would be a mistake.

How a change could hit your numbers

‍Two different levers, two different effects — and they are worth understanding separately.

Removing interest deductibility bites every year you hold the property. Without it, you are taxed on your gross rent rather than your true profit, so for a recently purchased, highly geared rental, the annual tax cost can rise sharply even though your cash position has not improved. For a typical leveraged investor, the difference over the life of a loan can run well into six figures.

A capital gains tax bites once, when you sell — taxing the gain (broadly, the sale price less cost and capital improvements) rather than your yearly income. Its impact depends entirely on whether, and when, you sell, and on how much the property has gained. ‍

These are general illustrations, not a calculation for your situation — and the two could, in principle, apply together. The point is simply that a change of government could alter your returns through either mechanism, and the prudent response is to model both rather than hope for neither.

What you can do — and where we can help

‍•     Review how your rentals are owned — personal name, trust, look-through company or company. The right structure depends on your goals, and on getting tax and legal advice that work together.

•     Stress-test your position — ask your accountant or tax adviser to model your cash flow and tax both with and without interest deductibility, and with the proposed capital gains tax.

•     Don’t make irreversible decisions on assumptions — restructuring has its own costs and risks; do it for sound reasons, with advice, not in a panic close to polling day.

•     Keep your trust and estate documents current — so a change in the tax setting doesn’t catch your wider plan off guard.

We work alongside your accountant to make sure your ownership structures, trusts and estate plans are sound and fit your goals — whatever happens in November.

Where to get information and support

‍•     Labour’s stated priorities: labour.org.nz.

•     Inland Revenue on interest deductibility for residential rental property: ird.govt.nz.

•     Your own accountant or tax adviser, for figures specific to your portfolio.

One change to watch

Expect more detail from all parties as the 7 November election nears — and watch, in particular, for whether Labour confirms or rules out any change to interest deductibility, as opposed to its capital gains proposal. Coalition arithmetic matters too: potential partners may push for more far-reaching property-tax changes than Labour proposes on its own. We will keep an eye on it.

Own a rental and unsure how the election could affect you? RHL can review your ownership structures, trusts and estate plan so they’re sound, whatever the result — working in step with your tax adviser.  Get in touch.

This article is general information only and is not legal, tax or financial advice. It describes the parties’ publicly stated positions as at June 2026, which may change. Your situation is unique; please obtain specific legal and tax advice before acting.