Election 2026: National won’t back Act policy to give residential property investors tax relief by enabling negative gearing

So, an investor who suffered a $10,000 loss in a year (as their interest costs and other expenses exceeded their rental income, for example), and received a $100,000 salary from their unrelated day job, would only pay tax on $90,000 of income.

Under the status quo, the investor wouldn’t be able to make the $10,000 deduction and their full $100,000 salary would be taxed.

They could, however, carry the $10,000 loss forward to the following year, or offset it against income they received from other properties they had in their portfolio.

Act’s pitch was that changing the rules would be particularly beneficial for “mum and dad investors”, who typically don’t have large portfolios to offset their losses against under the existing rules.

It argued that if property investment was more attractive, more people would get into it. And if the supply of rentals relative to demand rose, this would put downward pressure on rents.

However, providing investors with tax relief wasn’t a priority for Willis.

She suggested that once the state of the country’s finances improved, she would rather adjust income tax brackets to account for inflation and do more to encourage business growth.

“In the future, as we return the books to surplus and we’re able to consider next steps in tax relief, my priority will be for workers, for their incomes, but also ensuring that we create conditions for businesses that encourage them to invest and grow,” Willis said.

She declined to discuss whether she believed Act’s proposal to allow negative gearing was fair.

This used to be allowed until 2019, when the Labour-led Government introduced a loss ring-fencing rule.

It argued that because owner-occupiers couldn’t offset their interest expenses against their other taxable income, negative gearing put them on the back foot when they bid for property against investors.

New Zealand First’s finance spokesman Shane Jones, who was a part of that Labour-led Government, declined to share his view on Act’s policy.

The Australian Government has just introduced a loss ring-fencing rule akin to what is in place in New Zealand, with an exemption for new builds.

Its crackdown was met with some fierce opposition, given how common a strategy negative gearing is in Australia.

In New Zealand, 163,050 investors carried forward $2.8 billion of losses from the 2024/25 tax year, Inland Revenue figures released under the Official Information Act said.

Act expected its proposal to abolish loss ring-fencing would cost the Crown $246 million in its first year, rising to $303m in its fourth year.

The party is an advocate for lower taxes and government spending.

While it doesn’t believe the books are in good enough shape for the Government to deliver income tax cuts, it is campaigning on making KiwiSaver returns (like dividends and interest income) tax-exempt.

Jenée Tibshraeny is the Herald’s Wellington business editor, based in the parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.