New Zealand already has a capital gains tax - you probably just didn't know it

Two University of Auckland researchers have argued New Zealand already has a tax on its books it can use to tax property investors. Photo / 123rf

Prime Minister Jacinda Ardern might have ruled out bringing in a capital gains tax, yet there is already a tax on the books that could do the job instead.

That's according to two University of Auckland researchers, who say section CB6 in the Income Tax Act has existed since the 1970s but was little-known because it was rarely enforced.

Yet - if given a simple tweak - it could be turned into an effective capital gains tax targeting the profits investors made when buying and selling homes, Michael Rehm and Yang Yang said in a new research paper.

They argued recent skyrocketing house prices had thrown taxation debate back into the spotlight.

And rather than considering new taxes, section CB6 already stated that anyone buying land with the intention of profiting from its resale should pay income tax on the gains, Rehm said.

Governments had not enforced this in the past because they argued it was too hard to know a buyer's intention at the time of a purchase.

Yet Rehm said his decade-long analysis of Auckland rental home purchases showed nearly all made initial losses and relied on a profit at resale to be considered wise financial investments.

"These things on a cashflow basis are complete dogs," he said.

"The only rhyme or reason you would invest in property is you are hoping to get some sort of payout at the end."

That meant investors could safely be said to be acting as speculators hoping for house prices to rise - and that had wider ramifications for society, Rehm said.

Auckland's median sales price had now soared to $1 million for the first time in October, while national prices also ballooned to a new high, the Real Estate Institute reported.

These types of price jumps were increasingly transforming housing from a place where Kiwis sought shelter and raised their families to a golden goose that people treated as nest eggs, Rehm said.