Luxon's Property Profits Highlight Unfairness, Labour Says

Wednesday, 2 October 2024, 5:25 pm
Article: RNZ

Giles Dexter, Political Reporter

Profits the Prime Minster will make from property sales highlight the unfairness of New Zealand's tax system, opposition parties say.

Christopher Luxon recently sold two properties, making a profit on those sales which is exempt from tax.

After taking office, the Prime Minister stayed in his central Wellington apartment while Premier House was refurbished. He moved into Premier House over the weekend.

Luxon bought the apartment for $795,000 in 2020. According to1 News, the apartment was recently sold for $975,000 (the sale is yet to be settled).

Luxon would have had to pay a form of capital gains tax under the bright-line test - if the government had not changed the rules.

The bright-line test taxes gains made on a property other than the family home, if it is sold within a certain time period.

As Luxon bought the apartment after the previous government introduced the five-year bright-line test, and sold it within those five years, he would have had to pay tax on the capital gains under the previous rules.

Labour further extended the test to ten years in 2021, but the current government has reduced the bright-line test down to two years, so Luxon is exempt.

Furthermore, the new two-year test came in on 1 July, meaning Luxon has only narrowly avoided having to pay the tax.

He has also sold an investment property in the Auckland suburb of Onehunga. He purchased the property in 2015 for $650,000 and according to1 News has sold it for $930,000. Because of when Luxon bought the property, it would have been exempt from all forms of the bright-line test.

It was unlikely Luxon would have made the complete difference as profit, given money spent on renovations and agent fees, although some of these expenses would have been deductible.

The prime minister's office said the management of the Luxons' properties were private matters, and unrelated to Luxon's capacity as prime minister.

Luxon himself has defended the sales and the profit he has made, telling Newstalk ZB he expected the criticism.

"As I said from my first day in politics, I'm a kid whose parents left school at 16, I went to university, did well in the world, successful, I get it. And I've chosen to come into politics because I want to add back to New Zealand," he said.

"If we're going to criticise people for being successful, let's be clear, I'm wealthy."

Last week, he also criticised ANZ's chief executive Antonia Watson for suggesting it was time for a capital gains tax.

Green Party co-leader Chlöe Swarbrick said the property sales and Luxon's criticism of Watson had put the debate around a capital gains tax back in the spotlight.

"Income is income. If somebody makes their money by working, they pay tax. But under our current economic settings, if somebody makes their money speculating on property, they don't," she said.

"The irony of capital gains on property isn't because of some genius of the speculator, but because of the investment that everybody else, taxpayers, are making in the surrounding infrastructure, and as a result of manufactured scarcity resulting in our housing crisis."

Swarbrick acknowledged Parliament was part of the property-owning class. According to the 2024 Pecuniary Interests register, only six MPs said they did not own a home, while about half reported owning more than one. Luxon also owns two residential properties and three other investment properties in Auckland.

"I think that there are really due questions about the fact that politicians certainly continue to pass laws which benefit them and everybody else in the upper echelons of our society and our economy."

Labour's deputy leader Carmel Sepuloni told Morning Report the Prime Minister was making a huge capital gain off his property, while knowing there was appetite for a discussion around tax.

"He keeps shutting down the conversation with respect to a capital gains tax, and then here is is making huge capital gain himself. I feel like he is conflicted," she said.

Sepuloni believed New Zealanders were more open to discussing the option than when Labour floated it in the past

"We've got future pressures on the horizon, whether it be infrastructure, our ageing population, our workforce needs, and all of those things are going to cost money and we don't necessarily have the revenue stream to be able to pay for them. So I think there is much more of an appetite to at least have the conversation," she said.

However, the government was not budging on the matter.

"The Prime Minister has been clear on his position on new taxes. A capital gains tax, which the Labour Party wants, would stifle investment. As a government, we're trying to attract more investment, not discourage it," a spokesperson from his office said.

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