National says Labour’s CGT will hit small businesses

National says Labour’s proposed Capital Gains Tax (CGT) could hit small-business owners who own the commercial property they operate from, despite Labour stating businesses will be exempt.

Labour’s policy says businesses are exempt from the CGT, while commercial property is included.

It says the tax would apply to profits made on property sold after July 1, 2027.

National’s Finance spokesperson Nicola Willis says the exemption would not cover a business owner who sells their commercial property and leaves the business, including on retirement.

“Under Labour’s proposal, a small business owner who owns the property they operate from would face a CGT when they sell up,” Willis says.

“Labour’s only carve-out is for someone who wants to sell one commercial property and buy a bigger one, because they are staying in the business but operating from larger premises.

“But if a small business owner decides to permanently sell up, perhaps because they are entering retirement, the property they operate in will be subject to Labour’s CGT.

“That might include a dairy owner who owns a small shop in Hamilton. If the value of their property increases by $100,000 over 10 years, even if that’s just driven by inflation, then the owner will be subject to a $28,000 tax bill when they sell the business upon retirement.”

She says the policy could also affect small-business owners who are forced to sell because of financial or personal circumstances.

“New Zealanders don’t just sell their businesses when they retire,” Willis says. “When financial pressures intensify, perhaps during the breakdown of a relationship or a difficult diagnosis, Kiwis often have no choice but to shut up shop and move on. Labour would tax them for doing so.”

Labour MP Barbara Edmonds says businesses, both residential and commercial, will be excluded from the proposed CGT, with the tax going toward funding three free GP visits a year for Kiwis.

Willis says small-business owners who have spent years building their businesses and buying properties they operate from could be affected by the proposed tax.

“Ultimately for New Zealanders, Labour’s CGT will erode their financial security,” Willis says.