NZ Capital Gains

Core rule: no general CGT

• No general CGT in New Zealand — New Zealand does not have a general capital gains tax. Gains from the disposal of most assets — shares, bonds, investment properties held long-term — are not taxed. However, several regimes effectively tax certain gains.

Bright-Line Test (residential property)

• Bright-line test — taxable if sold within period — The bright-line test treats gains from sale of residential property as taxable income if the property is sold within: 2 years for property purchased from 1 July 2024 onwards; 5 years for property purchased 27 March 2021 – 30 June 2024 (new builds: 5 years); 10 years for property purchased before 27 March 2021 (new builds: 5 years).
• Bright-line gain taxation rate — up to 39% % (taxed at seller's marginal income tax rate)
• Main home exemption — The taxpayer's main residence is excluded from the bright-line test (with some restrictions if it was rented out or if multiple properties exist).

Share trading: investor vs trader

• Share trading income taxability — NZ does not tax investment gains on shares, but share trading income is taxable as ordinary income if the IRD determines the person is carrying on a business of share trading. The distinction is based on intent at the time of purchase — if shares are acquired with the purpose of resale, gains are taxable. For most private investors making buy-and-hold investments: no tax on gains.

Foreign Investment Fund (FIF) regime

• FIF regime application — New Zealand residents holding foreign shares (outside Australian shares listed on an Australian exchange, below NZD $50,000 in total) are subject to the FIF regime: Tax is calculated on a deemed income basis (fair dividend rate method: 5% of opening market value per year), NOT on actual gains/dividends. Applies to each share in a non-Australian foreign company. Only applies if total cost of foreign investments exceeds NZD $50,000. This is a significant complexity for NZ residents with offshore share portfolios.
• FIF regime cost threshold — 50000 NZD (total cost of foreign investments must exceed this for FIF regime to apply)
• Fair dividend rate — 5% % (of opening market value per year, deemed income basis)

Exit from New Zealand

• No general exit tax; effects of ceasing NZ tax residency — No general exit tax in New Zealand. When you cease to be a NZ tax resident: FIF regime ceases to apply to foreign shares from departure date. Bright-line test: property sold after departure — may still trigger if within the bright-line period and you were NZ resident when it was purchased.

Sources

• Income Tax Act 2007 (NZ), subpart CB — property income rules (Income Tax Act 2007 (NZ), subpart CB (property income rules))
• Bright-line test source — Bright-line test: IR.govt.nz/brightline (IR.govt.nz/brightline)
• FIF regime source — FIF regime: Income Tax Act 2007, subpart EX (Income Tax Act 2007, subpart EX)

Working paper only. The FIF regime is complex and depends on the specific foreign investments held. The bright-line test periods have changed multiple times — confirm the applicable period based on the purchase date. Have a qualified NZ chartered accountant review.