Edited version of your written advice

Authorisation Number: 1012744779048

Ruling

Subject: CGT - personal use assets

Question 1

Are the bottles of wine personal use assets as defined in subsection 108-20(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes

Question 2

Will any bottles of wine in the collection be treated as a set of personal use assets for the purposes of section 108-25 of the ITAA 1997?

Answer

No

This ruling applies for the following period:

Year ending 30 June 2015

The scheme commences on:

1 July 2014

Relevant facts and circumstances

You have a collection of bottles of wine.

The collection was owned jointly by you and your spouse and had been collected over many years (decades) from a number of sources.

No single bottle of wine that has been acquired had a purchase price in excess of $10,000.

The bottles were acquired individually, not in groupings or sets.

None of the wine collection has been previously sold by you or your spouse over the years.

The wine was held for personal use and some bottles were regularly consumed.

Your spouse passed away at which time you acquired sole ownership of the wine collection.

You have recently sold your home and are relocating. Accordingly you intend to dispose of the wine collection by public auction.

The auctioneer has recommended that some of the bottles of wine be sold as a grouping, to maximise your return. Others will be auctioned individually.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 108-20

Income Tax Assessment Act 1997 Section 108-25

Income Tax Assessment Act 1997 Subsection 118-10(3)

Income Tax Assessment Act 1997 Subsection 128-15(6)

Reasons for decision

Personal use assets

Any capital gain you make from the disposal of a personal use asset is disregarded where the first element of its cost base is less than $10,000 (subsection 118-10(3) of the ITAA 1997).

A personal use asset is defined in subsection 108-20 of the ITAA 1997 and includes a capital gains tax (CGT) asset (excluding a collectable) that is used or kept mainly for your personal use and enjoyment.

Additionally, where a CGT asset is acquired by a beneficiary from a deceased estate, subsection 128-15(6) of the ITAA 1997 provides that the beneficiary will be taken to have acquired a personal use asset if that asset was a personal use asset in the hands of the deceased.

In this case, the wine bottles had been acquired over many years from various sources. The wine was held for both you and your spouse's personal enjoyment. Accordingly, the bottles of wine are considered personal use assets as defined in subsection 108-20 of the ITAA 1997.

Sets of personal use assets

Section 108-25 of the ITAA 1997 provides that where you dispose of personal use assets individually that are part of a set and would ordinarily be disposed of as part of a set, the exemption contained in section 118-10 of the ITAA 1997 will only apply where the set was acquired for less than $10,000.

In this case, the bottles of wine were generally acquired individually. While the auctioneer has recommended that some bottles be grouped together for the purposes of maximising the auction proceeds, we do not consider that any of the bottles would ordinarily be expected to be disposed of as a set. Accordingly, for the purposes of applying section 108-25 of the ITAA, we do not consider that any of the bottles of wine are part of a set.

Accordingly, where the first element of the cost base of any individual bottle of wine is less than $10,000, you can disregard any capital gain you make from its disposal.

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