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This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4.

Edited version of your private ruling

Authorisation Number: 1012152260232

Ruling

Subject: Capital gains tax - wine collection

Question: Is your wine collection considered to be a capital gains tax (CGT) collectable asset?

Answer: No.

This ruling applies for the following period

Year ended 30 June 2011

The scheme commenced on

1 July 2010

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

Mid 2005 you purchased a number of bottles of wine A and a number of bottles of wine B through an Australian wine company for a specified sum.

You purchased the wine for investment purposes.

You immediately transported the wines to an overseas storage facility.

Mid 2006 you flew overseas at a cost of $X to visit the storage facility to check on your wine.

Early 2009 you took the wine from the storage facility. Your storage costs amounted to $X.

Your relation disposed of wine B for $X.

You stored the bottles of wine A with a friend in an overseas country.

You had intended to return to the overseas country in the future to dispose of the bottles of wine A.

Due to a medical condition you are unable to travel overseas to undertake the disposal of the wine A.

Your friend who was storing your wine A passed away.

As you had no-one left in the overseas country to store your wine A and your inability to travel you made the decision to freight it back to Australia.

You will give a bottle of wine A to each of your nominated relations on special events during their lives.

You will retain a bottle for yourself.

Late 2011 you freighted wine A back to Australia at a cost of $X.

You were advised by your previous tax agent that you could claim pro-rata the costs you incurred to visit your wine collection in the overseas country.

The costs that you have incurred in maintaining your wine collection you consider to be a capital loss.

You have provided a copy of documentation to support your application and these documents are to be read with and forms part of your application for the purpose of this ruling.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 104-10

Income Tax Assessment Act 1997 Section 118-10

Income Tax Assessment Act 1997 Section 108-10

Reasons for decision

A capital gain or capital loss can only occur when there is a CGT event involving a capital asset.  The most common CGT assets include land and buildings, shares, collectables which cost over $500 or personal use assets which cost over $10,000, for example, a boat.

The most common CGT event, CGT event A1, occurs when you dispose of a CGT asset, the time of the event is when you enter into the contract for the disposal or if there is no contract - when the change of ownership occurs.

Collectables

A collectable is defined as being:

Personal use assets may include such items as boats, furniture, electrical goods, wine collection and household items. Any capital loss you make from a personal use asset is disregarded.

In your case, your wine collection is not a collectable but is considered be a personal use asset. You are giving away a number of your bottles of wine A so you will make a capital loss and any capital loss you make from a personal use asset is disregarded.

For more information on personal use assets please see the enclosed information which has been taken from the Guide to capital gains tax 2010-11 (NAT 4151).

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