Willis courts Australian investors as Canberra tightens capital gains tax

Finance Minister Nicola Willis has positioned New Zealand's absence of a comprehensive capital gains tax as a competitive advantage, directly targeting Australian investors angered by Canberra's May 2026 budget reforms that will impose a 30% minimum tax rate on realised gains from 1 July 2027.

From 1 July 2027, Australia will replace its long-standing 50% capital gains tax discount with cost-base indexation and a 30% minimum tax rate on realised gains for individuals, trusts and partnerships. Pre-1985 assets, previously exempt, will be brought into the tax net for gains accruing after that date.

Willis invoked the famous Australian tourism slogan to make her pitch.

Where the bloody hell are you? Come over.

She said this framing positioned New Zealand as a lower-tax jurisdiction for mobile capital, particularly property investors and business owners facing higher effective tax burdens across the Tasman.

Election-year stakes

The timing is politically charged. New Zealand heads into a general election later in 2026 in which Labour has committed to a narrowly targeted capital gains tax on investment property, with all revenue hypothecated to health. The National-led Government has ruled out any such measure, arguing it would damage productivity and investment.

New Zealand's current settings

New Zealand's current tax treatment of property gains remains limited to the bright-line test, which since 1 July 2024 applies a two-year holding period to all residential property. Gains realised within that window are taxed as income at the seller's marginal rate, up to 39%. The test does not apply to the main home, farmland or commercial property. Interest deductibility on residential rentals was fully restored from 1 April 2025, reversing earlier ring-fencing measures.

These settings stand in sharp contrast to Australia's forthcoming regime, which will apply across shares, commercial property, trusts and pre-CGT assets alike. New residential builds in Australia will have a choice between the 50% discount or the new indexation-plus-minimum-rate model from 1 July 2027. Negative gearing on residential property acquired from 12 May 2026 will be ring-fenced to rental income and residential capital gains only, with new-build housing retaining some concessions.

Australia's stated policy objective is to improve housing affordability by reducing the tax advantages that have favoured leveraged investment in established dwellings.

The revenue debate at home

Treasury modelling carries material weight in the local debate. The Tax Working Group (2018–19) estimated that a broad capital gains tax excluding the family home could raise 1.2% of GDP annually in the long run, with cumulative revenue reaching $6.2 billion by year ten under its illustrative modelling. Treasury has continued to highlight the distributional and efficiency arguments for broadening the tax base, noting that high-wealth households often face lower effective tax rates when capital gains are excluded.

Labour's current proposal is more modest — applying only to investment property — but still represents a material departure from the status quo. The party has committed to ring-fencing all revenue for health spending, including three free GP visits a year.

Migration flows add weight to Willis's pitch

Cross-Tasman migration data add weight to Willis's competitive-advantage claim. Stats NZ figures show a net loss of around 30,000 New Zealand citizens to Australia in the December 2025 calendar year, with 61% of all NZ citizen departures heading to Australia. Some reports indicate approximately 80,400 New Zealanders departed to Australia in 2024, a 12% increase from the previous year. Property investors are a visible subset of these flows.

Mixed market signals

Market and regulatory signals are mixed. Westpac forecasts New Zealand economic growth will outpace Australia's in 2025–26 on the back of lower interest rates and export recovery, potentially supporting property values and investment returns. Yet analysts note that any perception of tax arbitrage could accelerate inbound investment or slow outbound migration, with second-order effects on Auckland and Queenstown housing markets.

International comparators reinforce New Zealand's outlier status. New Zealand remains one of only a handful of OECD countries without a comprehensive CGT, while Australia's changes bring it closer to European-style indexation-plus-minimum-rate models. Conflicting signals emerge between Treasury's revenue-neutral modelling and political rhetoric that any CGT would damage productivity and deter foreign capital.

The 2026 Australian changes therefore serve as a live experiment in whether tightening tax settings on investment property can deliver affordability gains without triggering capital flight — a debate Willis is clearly keen to frame in New Zealand's favour. The election later this year will test whether voters accept that framing or prefer Labour's narrower, health-funded alternative.