This article is the second in our series on Labour's proposed Capital Gains Tax (CGT), announced in October 2025. Read our first article here: Labour’s capital gains tax: time to think ahead.
Exemptions and inclusions
Labour's proposed CGT would apply a flat 28% tax on gains from the sale of commercial and residential property after 1 July 2027, with exemptions for the family home, farms, KiwiSaver, shares, business assets, inheritances and personal items. Recent commentary has focused on the effect for everyday property owners, yet the reach of the proposed tax is likely to extend well beyond mums and dads. Many organisations may find themselves brought into the tax net for the first time. Charities, iwi, local authorities, public authorities and businesses with significant land holdings should all be asking the same question: are we in scope?
While the answer may be straightforward, without official confirmation, the question remains.
Defining the new regime: why form matters
If Labour confirms the CGT will operate within the existing income tax framework, entities currently exempt from income tax should have clarity on their position, while others will need to consider whether they are captured by the proposed policy. Under current tax legislation, certain entities — including charities, local authorities and public authorities — enjoy income tax exemptions.
If the CGT is structured as a standalone tax, those exemptions may not carry over, potentially exposing land-rich entities to CGT on property sales for the first time. This is particularly relevant for organisations such as retirement villages and rest homes, iwi land holdings, and other entities that hold significant property as part of their core operations, especially where they are structured as charities. Labour's proposal raises both challenges and opportunities for compliance and planning.
Mixed-use properties add a further layer of complexity. A charitable entity may hold a single property used partly for operations (such as staff or resident housing) and partly for investment (such as leased commercial space). How gains on such properties would be split between exempt and non-exempt use, and on what basis, remains unclear.
Getting ahead of the uncertainty
There is time before July 2027 to consider how your organisation might be affected. Charities, iwi, governing authorities and other potentially affected organisations should use that window to seek early clarification on their status under the new rules. Please get in touch with our team if you would like to discuss how this may affect you.
