Election tax policies, part one

By Robyn Walker

Tax policy can decide elections, and Election 2026 may be no exception. Election campaigns inevitably involve fiscal promises, and those commitments must be funded through reprioritised spending, additional debt, higher tax or another mechanism.

With the election less than four months away, details of tax policies are starting to emerge and Tax Alert will be summarising what is on offer, starting with the two most detailed policies released to date by the Green Party and The Opportunity Party. Both parties start from a similar premise, that the existing tax system is no longer fit for purpose, but propose materially different reforms.

The Green Party

The Green Party tax policy is centred on a premise of ensuring “the super-rich and mega-corporations contribute their share to the society they profit from”. The proposals to achieve this include:

• Introducing a 2.5% wealth tax on net assets of any individual in excess of $10 million. This will apply to assets such as property and shares, but will exclude the family home. The policy notes that property with a value over $50,000 will be included on the basis of insured value (for example, artworks). Assets held in trusts will most likely be attributed to the settlor (it’s unclear what happens when the settlor is deceased) but may also be apportioned to beneficiaries in some cases. The wealth tax is estimated to bring in an additional $3.7 billion to $4.1 billion per year.
• A capital acquisition tax would be applied to inheritances and gifts valued above $1 million. The tax would be paid by the recipient. Gifts of the family farm or family home would be exempt from the tax. This is, in essence, an inheritance tax, but also ensures that gifting while alive isn’t an obvious loophole. It is unclear whether the threshold applies on a per-gift basis or whether it is necessary to tally lifetime gifts.
• Inland Revenue currently uses turnover of $30 million as a threshold for categorising a business as “large”, so that those businesses receive greater compliance focus from Inland Revenue. Under the Green Party tax proposal, those large businesses will also see an increase in the company tax rate from 28% to 33% (a return to the company tax rate prior to 2008). In 2025, companies paid $19.7 billion in tax, and increasing the rate is expected to raise an additional $1.37 billion to $1.57 billion per year.
• Banks with liabilities in excess of $100 billion will be subject to a levy of 0.06% of total liabilities. This is expected to affect only the four largest banks and raise $1.5 billion over the first four years.
• Multinational businesses operating in New Zealand would have service fees and licence fees paid to related parties reclassified as royalties. This means that non-resident withholding tax would be withheld from all payments. This is forecast to raise more than $200 million in additional tax per year.
• Rather than proposing a capital gains tax, the Green Party proposes to restore the bright-line period to 10 years and to once again deny the ability for landlords to claim interest as a deductible expense. While the policy won’t apply to family homes, there is no indication that there will be concessionary rules for “new builds”, as was the case when these rules were previously in place.
• Personal tax rates will change, with the significant changes being the introduction of a tax-free threshold for the first $10,000 of income, but also a 45% top personal tax rate applying to income in excess of $160,000.
• Inland Revenue would receive additional funding of $100 million per year to enforce the new rules.

Comment

The Green Party proposals would raise around $5 billion per year, subject to behavioural responses. Wealth taxes, in particular, are uncommon because they can result in capital flight and mobile wealth would be likely to relocate out of New Zealand. Inland Revenue’s 2026 Long Term Insights Briefing (LTIB) considered alternative taxes such as wealth taxes. Practical challenges such as the need for real-time valuation of assets and high administration costs were raised, as was the practical issue associated with illiquid assets. The LTIB also noted “there is likely to be a reasonable risk that adding a wealth tax to the tax system would make very wealthy residents more likely to emigrate and make very wealthy non-residents less likely to immigrate.”

New Zealand has historically had inheritance and gift taxes, with estate duty having been repealed in 1992 and gift duty being repealed in 2011 due to the high costs relative to tax collected. The capital acquisition tax is, in essence, a reinstatement of such taxes. Inheritance taxes are more common internationally than wealth taxes, with around two-thirds of OECD countries having them. The LTIB notes that inheritance taxes can be viewed as inequitable as they essentially place a higher tax burden on those who save and die with wealth rather than consuming it within their lifetime. Such taxes can be said to “improve equality of opportunity by reducing the advantages some people receive from being born into a wealthy family”, according to the LTIB. While the Green Party policy notes there would be an exemption for family farms and family homes, there is no proposal to exempt businesses, so passing on the family business will result in a tax bill for the recipient (the majority of OECD countries with an inheritance tax exempt family businesses).

While the company tax rate policy indicates that this threshold is targeted at “banks, supermarkets and energy companies”, it would affect thousands of businesses. Statistics New Zealand doesn’t provide full data broken down by turnover, but the most recent statistics show that there are approximately 4,500 businesses with turnover above $20 million, of which 1,830 had turnover above $50 million. New Zealand’s company tax rate, at 28%, is already the ninth highest in the OECD and would see New Zealand’s rate increase above Australia (which has a 30% rate for large businesses and a 25% rate for businesses with turnover under A$50 million). A high company tax rate acts as an increase in the cost of capital and is a deterrent for foreign investment. Inland Revenue considered this issue in its 2022 Long Term Insights Briefing, where consideration was given to instead reducing the company tax rate. It is worth noting that domestically the company tax rate is viewed as an interim tax until profits are distributed to shareholders, so while smaller companies would benefit from retaining a 28% company rate, shareholders may end up paying the 45% top personal tax rate eventually.

The Green Party policy is silent as to whether other tax rates would move to match the change in company and personal tax rates, for example, whether the top Portfolio Investor Rate would increase above 28% or the trustee tax rate would increase from the current 39% rate.

The Opportunity Party

The Opportunity Party (TOP) has never reached the threshold to enter Parliament, but early polling suggests this may be its best prospect of reaching the 5% MMP threshold. For some, TOP may be a protest vote against the status quo, but for others there may be some appeal in the radical “tax reset” proposed by the party.

At the centre of TOP’s policy is a proposal to move away from overreliance on taxes on income and instead tax land. The social welfare system would be completely overhauled through an annual tax-free payment of $19,400 to every adult (this would be paid fortnightly). This is known as “citizens’ income”, or more commonly as “universal basic income” (UBI). While existing benefits would be abolished, additional amounts would be paid to certain citizens, including new parents, sole parents and superannuitants (with the additional payment abating if household income exceeds $50,000).

Existing personal tax rates would be replaced by three new brackets:

• Income up to $50,000: 28%
• Income between $50,000 and $200,000: 34%
• Income above $200,000: 39%

When the UBI is combined with personal tax rates, all New Zealanders would pay less personal tax (and those earning less than ~$65,000 pay less tax than the UBI received).

While less tax is paid on labour, landowners will be subject to a substantial land value tax (LVT). Aside from collecting the necessary tax to pay for the citizens’ income, the LVT aims to redirect investment from speculative investment in land to more productive uses. The LVT, which is forecast to raise $24 billion per year, would be set at 1.75% of the unimproved value of urban land and 0.5% of the value of rural land. Buildings and other land improvements are not subject to the tax. It is acknowledged that the LVT may create hardship for asset-rich and cash-poor superannuitants, so the tax will be able to be deferred until death. TOP anticipates that an LVT will result in land values falling by 10–15%.

Savings are also encouraged by TOP with a proposal to introduce “KiwiSaver 2.0”. KiwiSaver contributions would increase to 12%. There will be no ability to access KiwiSaver balances for hardship or first-home deposits. All KiwiSaver contributions will be exempt from income tax, with a proposal to also exempt earnings by KiwiSaver funds from tax progressively over 20 years. The policy does not explain whether KiwiSaver withdrawals will instead be subject to tax. The tax cost of allowing pre-tax income to be contributed to KiwiSaver and investment savings to be exempted from tax is not costed; rather, it is simply noted that the New Zealand Superannuation Fund will pay for the tax exemptions.

In addition to the “tax reset”, TOP has also released an economic policy proposing increased research and development support. The policy states: “It will allow claiming back as a tax credit up to 25% of the cost of rolling out high-tech solutions such as AI and digital platforms, new plant and machinery and networked or autonomous equipment.” This change is expected to double the $600 million currently spent annually on the research and development tax incentive. TOP also proposes a new type of company known as an “impact company”. People investing in impact companies will be able to claim up to $100,000 annually as a tax deduction.

Comment

The outcome under the tax reset is that those who currently don’t have assets may find themselves materially better off, whereas those who do have property assets, including rental properties, or above-average incomes are likely to be paying materially more tax. TOP provides a tax calculator so taxpayers can understand the personal impact of the tax reset.

The concept of a UBI may have some appeal if it were to truly removal all the administrative and compliance costs of running social welfare systems, but it comes with a substantial fiscal cost. There are legitimate questions to answer as to whether society would be better off or whether the existence of a UBI (with high tax rates on the first dollar earned) provides incentives to work. Some limited trials of UBIs have indicated that, while recipients were generally happier from having a UBI safety net, they were not more likely to obtain employment.

The KiwiSaver changes are significant. Moving from our existing Tax-Tax-Exempt (TTE) framework for taxing savings to an Exempt-Exempt-Tax (EET) framework is a major shift but is addressed only briefly in the policy paper. The 2017 Tax Working Group looked at the taxation of savings, and estimated that if KiwiSaver contributions remained at 3%, the fiscal cost of moving to EET would be between $2.1 billion and $2.5 billion per year and would require a 30-year transition period.

The idea of introducing a land tax has been toyed with periodically as land taxes are viewed as being “less distortionary” with relatively low administrative and compliance costs. Inland Revenue’s 2026 LTIB also provided commentary on this alternative tax base. New Zealand already has a land tax in the form of local government rates, and the LTIB notes that only three OECD countries raise more land tax as a percentage of GDP than New Zealand.

According to the LTIB (which references previous reviews and studies), a land tax “would be expected to cause the value of land to fall by a lump sum equal to the net present value of expected future land tax liabilities. As a result, land taxes are a lump sum tax on those who own land when the tax is introduced.”  The LTIB identifies significant equity and political challenges. A land tax would be horizontally inequitable because it would fall on existing landowners rather than future purchasers, and because it taxes wealth held in land but not wealth held in other assets. It could create cashflow problems for asset-rich but income-poor owners, materially affect highly leveraged borrowers, and disproportionately impact land-intensive sectors such as farming and forestry. When viewed in conjunction with the UBI, a land tax may result in upward pressure on rents as landlords seek to cover increased tax costs.

Inland Revenue’s LTIB analysis suggests liabilities would generally rise with income, indicating some progressive characteristics, but it also highlights concerns for Māori landowners. TOP have suggested concessions designed to counter some of the challenges including exemptions for communally owned Māori land, conservation land, land owned by club, societies and non-commercial religious organisations, local and central government, treaty settlement land and social housing. Tax deferrals will also be available for the elderly (with payment due when a property is sold) and farmland.

Tax reform is firmly back on the political agenda. While under a MMP environment neither package is ever likely to be enacted in its entirety, both signal growing pressure to broaden the tax base, reduce reliance on labour income, and address perceived inequities in the taxation of wealth, land and capital. For taxpayers, the immediate issue is not whether these specific proposals become law, but whether the election campaign accelerates a broader debate about who should bear the tax burden, and how much change New Zealand’s tax system can absorb. Tax Alert will continue to monitor election tax policies as they are released.