ATO Interpretative Decision
ATO ID 2011/9
Income Tax
Capital gains tax: collectable - art work acquired for investmentFOI status: may be released
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This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is an artwork, held as a long term investment in the expectation of capital appreciation, a collectable under subsection 108-10(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?
Decision
Yes.
Facts
A taxpayer has made a capital loss from the sale of an artwork they acquired for the purposes of long term investment in the expectation of capital appreciation.
Reasons for Decision
Subsection 108-10(1) of the ITAA 1997 provides that in working out your net capital gain for an income year, capital losses from collectables can be used only to reduce capital gains from collectables.
Subsection 108-10(2) of the ITAA 1997 provides among other things that an artwork that is used or kept mainly for your personal use or enjoyment is a collectable.
In Favaro v. FC of T (1996) 34 ATR 1; 96 ATC 4975, the Federal Court held that Italian currency which was converted to Australian currency was not a 'personal use asset' under the equivalent provision of the Income Tax Assessment Act 1936 (ITAA 1936). The Court accepted the Commissioner's submission that 'the expression "personal use" is used in section 160B of the Income Tax Assessment Act 1936 (the ITAA 1936) in contradistinction to use for business or profit making purposes' (section 160B Personal-use assets of the ITAA 1936 was rewritten as sections 108-10 and 108-20 of the ITAA 1997).
The word 'contradistinction' means distinction by contrast or opposition (The Australian Oxford Dictionary, 1999, Oxford University Press, Melbourne). Therefore, an asset that is not used for business or profit making purposes is used or kept mainly for personal use and enjoyment. The two categories are mutually exclusive.
In this case, the taxpayer acquired the collectable as a long term investment, and not in the course of carrying on any business or profit making activity. As such, it is considered the art work was used or kept mainly for the personal use or enjoyment of the taxpayer, and is therefore a collectable under paragraph 108-10(2)(a) of the ITAA 1997.
Date of decision: 8 February 2011Year of income: Year ended 2010-11
Legislative References:
Income Tax Assessment Act 1997
section 108-10
section 108-20
subsection 108-10(1)
subsection 108-10(2)
paragraph 108-10(2)(a)
section 160B
Case References:
Favaro v FC of T
(1996) 34 ATR 1
96 ATC 4975
ATO ID 2003/451
Other References:
(The Australian Oxford Dictionary, 1999, Oxford University Press, Melbourne)
Keywords
Capital gains tax
CGT assets
Personal use assets
Collectables
ISSN: 1445-2782
| Date: | Version: | |
| You are here | 8 February 2011 | Original statement |
| 23 February 2018 | Archived |