Finance Minister Nicola Willis is getting a lot more media coverage on this issue than she will when she delivers her Budget on Thursday.
Of course, Australians don’t really care about New Zealand tax policy or our politics generally.
This sudden interest has far more to do with the political narrative in Australia right now.
The Labor Government in Australia has toughened up its existing capital gains tax rules.
It’s been pitched as a cultural and political shift away from baby boomers and towards younger Australians who are struggling to get on to the housing ladder.
Unsurprisingly, it is copping a big backlash from the boomer-centric media – not least the Murdoch-owned News Corp papers, which don’t much like Labor Governments in the first place.
That is exactly where the “NZ as a tax haven” idea first popped up, a column in The Australian newspaper, which is a News Corp publication.
Credit to RNZ’s Susan Edmunds for picking up on it. Again, I’m suspicious of how serious it was ever meant to be. It makes a good headline.
To be fair, Edmunds made the whole thing worthwhile by undertaking a comprehensive comparison of our two tax systems.
In short, it does look like New Zealand is a generally lower tax economy, especially for older, wealthier people.
And that’s why our economy is doing so much better than Australia’s!
Sorry, to be clear, that is a joke.
I don’t think Willis was being all that serious either when she unleashed her excellent soundbite and grabbed headlines across the Tasman.
Willis made a pitch for Aussies (and Aussie-based Kiwis) to come to New Zealand to enjoy our more favourable tax settings.
She even used the infamous Tourism Australia catchphrase, “Where the bloody hell are you?”
That’s the line news radio hosts played to their listeners before bringing me on to explain why New Zealand isn’t quite the Canary Islands yet.
As much as I’d like to be patriotic about this, there are a few flaws in the pitch.
“Come and invest in New Zealand. We do not have a capital gains tax. Our inflation rate is lower,” Willis said.
That’s true.
Inflation is lower, and so are our interest rates.
But for ordinary workers, the fact that our unemployment rate is higher and our wages much lower might be a deterrent.
Older Aussies wishing to avoid property taxes might also want to consider the respective state of our housing markets.
In making its case The Australian article says: “New Zealand’s property market has firmly swung in favour of buyers.”
Yeah, well, that’s quite generous.
The other way to put it is that our property market has tanked.
In inflation-adjusted terms Auckland and Wellington house prices are off about 30% since they peaked in late 2021.
So capital gains haven’t really been much of an issue lately.
Things look better further south, and perhaps there’s a case for rich Aussies to move to Queenstown.
That might further elevate the multimillion-dollar housing market there and create a few additional service sector jobs for the young itinerant workers sleeping in their cars.
Too cynical? Sorry.
Perhaps it is a good time to get in on our ailing property market, a counter-cyclical buying opportunity.
Auckland’s fortunes will surely turn in the coming years.
And unless Labour wins the upcoming election (and doesn’t have to do a deal with NZ First, which killed the CGT in their last coalition), the profits will be tax-free.
In both Aussie radio interviews, the hosts were shocked by this revelation.
I did explain the bright-line test, which imposes tax on profits for secondary properties on-sold within two years.
But they were still incredulous.
I found myself scrambling to justify New Zealand’s unusual cultural dislike of capital gains tax.
I’ve invested plenty of column inches arguing the opposite. But when you’re challenged by an Aussie, it’s weird how reactionary you become.
If they’d had a go at Winston Peters, I’d probably have had something nice to say about him too.
One of the hosts said surely the lack of CGT means investment dollars are funnelled into property at the expense of more productive investments like listed companies?
Ah, yeah. I always like to do New Zealand proud, but it was hard to answer that one.
We don’t need deeper capital markets and a strong dynamic financial industry because… the All Blacks and Sir Peter Jackson… and we invented pavlova
I struggled to explain our cultural aversion to any form of CGT.
If I were a conspiracy theorist, then I might have argued that residential property has historically been the primary path to financial independence for working-class New Zealanders.
And that maintaining this status quo has suited the wealthiest New Zealanders just fine.
So we’ve ended up with a complicated hybrid opposition to a CGT that crosses traditional class barriers and makes even Labour politicians a bit wary of it.
I did make it clear that CGT remains a hotly debated topic in New Zealand, at least as far as any kind of tax debate can be.
I don’t blame Willis for chancing her arm.
The lower tax narrative doesn’t hurt the Government’s aim of attracting more foreign investment into New Zealand and trying to reverse the flow of Kiwis to Australia.
We’re already milking our “bolthole from the apocalypse” status in the US and Europe.
Some New Zealanders will have concerns about the risks to social cohesion that an Australian influx might bring.
Could it change the style of our meat pies? Are their flat whites slightly stronger? Will we see more cheating in our domestic cricket?
It’s a lot to absorb.
But in the Anzac spirit, I reckon we should welcome the Aussie tax refugees.
Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003.
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