more on Capital Gains Tax
I had hoped to provide more information on the various options for calculating Capital Gains Tax on collectables. But this has proved to be not so simple — and I suspect that will not surprise too many .
The ATO does have CGT guides but examples apply to shares trusts and properties where precise information on original costs is easily determined.
Collectibles are another matter altogether. I have some personal experience to offer.
Personal Experience of CGT
I had income from a number of separate sales of photographs from my personal collection in 2020. Our accountant wanted the exact original costs of acquiring each item. I had thought that items acquired before 1985 or for under $500, were exempt. The latter only applies if item is sold singly, mine were part of a set.
Fortunately, I had receipts in AUD for the most expensive items so the axact profit or loss could be determined. However, I elected not to search out receipts for some 50 items bought over a fifteen year period from multiple ebay and online auction and dealers.
Even if I had a receipt or a bank statement reference these dont always show the details of purchase. I would have also have needed to use the ATO historical currency calculator for items bought from foreign sellers to arrive at the AUD price on the day of purchase.
There was also separate fee of $100 from the accountant for processing each separate Capital Gains Tax sale. I could see the cost of the accountant for each claim might negate any gain.
So, without meticulous records Capital Gains Tax is hard.
So several thousand dollars had to be declared as straight income even though I knew the sale price was well below the initial cost of acquisition ie that the sales represented a loss. However, my ongoing Cultural Gift deductions negated the income not eligible for CGT.
So, if you acquired a collection out of passion and interest rather than as a carefully documented investment, Capital Gains Tax can be a problem for which having a Cultural Gift deduction can be a useful offset.
Sometimes a retrospective valuation can help ascertain the value of bequests on the day the work was inherited. That approach worked for a client when there was clear evidence the artist’s work had substantially declined in value compared to what the collection sold for over a decade or so since the bequest.
For more on Parting With Your Art — - click here