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Edited version of your private ruling
Authorisation Number: 1012544196070
Ruling
Subject: capital gain tax - disposal of hobby collection
Question 1:
Is the capital gain made on the disposal of your hobby collection disregarded?
Answer:
Yes.
This ruling applies for the following period
Year ended 30 June 2013
The scheme commences on
1 July 2012
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.
For more than 20 years you have been collecting.
You collected the specific items over the years with the intention of keeping them as a collection for your personal enjoyment and not for profit.
None of the collection was purchased for more than $500. You purchased the items in a specified range but the majority of the items you purchased were under $10.
You have not kept any of the receipts.
Due to financial circumstances you were forced to dispose of your collection for $X.
The items were mostly disposed of as individual items.
You have made a capital gain on the disposal of your collection.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 104-10.
Income Tax Assessment Act 1997 Subsection 108-10(2)
Income Tax Assessment Act 1997 Section 108-15.
Income Tax Assessment Act 1997 Section 118-10.
Reasons for decision
While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.
The most common capital gains tax (CGT), CGT event A1 which occurs when you dispose of a CGT asset and the time of the event is when you enter into the contract for the disposal or if there is no contract when a change of ownership occurs.
A collectable is defined as being:
· artwork, jewellery, an antique, or a coin or medallion; or
· a rare folio, manuscript or book; or
· a postage stamp or first day cover
that is mainly used or kept for your own personal use or enjoyment.
You make a capital gain if the capital proceeds from the disposal of a CGT asset are more than the cost base of the asset.
A capital gain from a collectable is calculated in the same way as a capital gain for any other CGT asset. However, if the collectable was acquired for less than $500, any capital gain made from its disposal is disregarded.
The only exception to this rule is if the collectable is part of a set. A set of collectables is taken to be one asset. Therefore, if the set was acquired for more than $500, then CGT would apply, even if the items were disposed of individually at a later date.
In your case, you have purchased numerous items over a period of more than 20 years for less than $X each. Regardless of whether they are a set or are individual items, the cost base of each of your items is less than $500.
Therefore any capital gain that you made on their disposal is disregarded.